For two substitutes in production,if the substitution effect dominates,
A) then the inputs are gross complements.
B) then the inputs are gross substitutes.
C) then the inputs could be either gross complements or gross substitutes.
D) then the inputs cannot be used at the same time.

Question

Quizplus · Accepted Answer

If the substitution effect dominates, it means that an increase in the price of one input will cause an increase in the demand for the other input. This behavior is typical of gross substitutes. Therefore, we can conclude that the inputs are gross substitutes.

For Two Substitutes in Production,if the Substitution Effect Dominates