When manufacturing a car, parts must be soldered together. This work can be done by labor or by a robot (capital). More robots will be hired when the price of labor increases. This is known as

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The scenario described is an example of the substitution effect, which refers to the tendency of firms to substitute factors of production (in this case, labor and capital) when the relative prices of those factors change. In this case, an increase in the price of labor leads to the substitution of capital (in the form of robots) for labor.

When Manufacturing a Car, Parts Must Be Soldered Together