The prices of productive factors influence how goods are produced.

Question

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The prices of productive factors such as labor, capital, and raw materials play a crucial role in determining how goods are produced. For example, if the price of labor is too high, producers may choose to use more automated machinery instead. Similarly, if the price of a particular raw material is too high, producers may choose to use a substitute material instead. Therefore, the prices of productive factors have a significant impact on production decisions and ultimately the nature of the goods that are produced.

The Prices of Productive Factors Influence How Goods Are Produced