According to the output effect of a factor price increase, the demand for A) the factor whose price has increased will decrease, but the demand for the other factors

will increase.

B) all factors decreases.

C) all factors increases.

D) the factor whose price has increased will increase, but the demand for the other factors

will decrease.

Question

Business

Ellen Donovan

10 February, 00:43

According to the output effect of a factor price increase, the demand for A) the factor whose price has increased will decrease, but the demand for the other factors

will increase.

B) all factors decreases.

C) all factors increases.

D) the factor whose price has increased will increase, but the demand for the other factors

will decrease.

+2

Answers (1)

Know the Answer?

Tori Cunningham · Answer 1

A) the factor whose price has increased will decrease, but the demand for the other factors

Explanation:

The production of goods and services in an economy comes from the combination of factors of production, for example labor and machinery. When the price of one of the factors of production increases, the quantity demanded by that factor will decrease, since there will be a rearrangement in production to alter the necessary composition between the factors in the production of a good. In other words, one factor will be replaced by another as much as possible.

For example, if the shoe production uses 2 machines and 10 workers. If the price of labor increases, the company may invest in buying one more machine and reducing the number of workers to 5.