When the price of labor falls,the quantity of ________ demanded will ________,but the effect on ________ is ambiguous.
A) labor; increase; capital
B) labor; decrease; capital
C) capital; increase; labor
D) capital; decrease; labor

Question

Quizplus · Accepted Answer

When the price of labor falls, firms are more likely to hire additional workers because labor has become cheaper, thus increasing the quantity of labor demanded. The effect on capital is ambiguous because firms might either invest more in capital due to increased production or substitute labor for capital, depending on the relative productivity and costs.

When the Price of Labor Falls,the Quantity of ________ Demanded