Sometimes it is easier to use machines and technology than to use labour. Which term refers to this type of situation?

Question

Quizplus · Accepted Answer

The substitution effect refers to the phenomenon where an increase in the price of one factor of production (in this case, labor) leads firms to substitute other factors of production (such as machines and technology) in order to minimize costs. So in situations where it is easier to use machines and technology than labor, the substitution effect is at work.

Sometimes It Is Easier to Use Machines and Technology Than