If teenagers and adults are substitutes in production,and the wage of teenagers falls,then
A) they must be gross substitutes, and the employment of adults will fall.
B) they must be gross complements, and the employment of adults will fall.
C) they could be either gross substitutes or gross complements, and the employment of adults could rise or fall.
D) they must be gross substitutes, and the employment of adults will rise.

Question

Quizplus · Accepted Answer

The relationship between teenagers and adults could be either gross substitutes or gross complements, which means that the employment of adults could either rise or fall. If they are gross substitutes, then as the wage of teenagers falls, firms will substitute teenagers for adults, leading to a fall in adult employment. However, if they are gross complements, then firms will use more teenagers and adults together, leading to an increase in adult employment as well. Since we don't know the exact nature of their relationship, option C is the best answer.

If Teenagers and Adults Are Substitutes in Production,and the Wage