Asked by
Elizabeth Avilez
on Nov 30, 2024
Verified
Labor and land are substitutes.If rent goes up and the amount of labor used goes down,we can assume that the
A) output effect outweighed the substitution effect.
B) the substitution effect outweighed the output effect.
C) the substitution effect and the output effect canceled each other out.
D) there is no way to determine the relative weights of the substitution effect and the output effect.
Substitution Effect
The adjustment in purchasing behaviors as a result of variations in the comparative costs of products, prompting buyers to switch from one item to another that is either cheaper or more costly.
Output Effect
The impact on economic output and productivity resulting from a change in the level of economic activity.
- Understand the importance and consequences of substitution and output effects on the allocation of resources.
Verified Answer
TG
Learning Objectives
- Understand the importance and consequences of substitution and output effects on the allocation of resources.