This topic contains a solution. Click here to go to the answer

Author Question: Explain why input demand curves slope downward using the concepts of the factor substitution effect ... (Read 135 times)

Mollykgkg

  • Hero Member
  • *****
  • Posts: 529
Explain why input demand curves slope downward using the concepts of the factor substitution effect and the output effect.
 
  What will be an ideal response?

Question 2

What is the midpoint formula for calculating a percentage change?
 
  What will be an ideal response?



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

catron30

  • Sr. Member
  • ****
  • Posts: 297
Answer to Question 1

When the price of an input increases, the firm will substitute away from it toward other types of inputs. This is the factor substitution effect. Since the input is more expensive, the firm's costs will rise. Therefore, the firm will lower its level of production in the short run. This means that the firm will need to employ fewer units of all of the inputs it uses. This is the output effect. Both of these effects suggest that if the price of an input rises, the quantity of that input demanded will fall. This inverse relationship between the price of an input and its quantity demanded is represented by a downward sloping curve.

Answer to Question 2

The midpoint formula is a more precise way of calculating percentage changes. It uses the value that is halfway between P1 and P2 for the base in calculating the percentage change in price, and the value halfway between Q1 and Q2 as the base for calculating the percentage change in quantity demanded.




Mollykgkg

  • Member
  • Posts: 529
Reply 2 on: Jun 29, 2018
Wow, this really help


kilada

  • Member
  • Posts: 311
Reply 3 on: Yesterday
Excellent

 

Did you know?

Vaccines prevent between 2.5 and 4 million deaths every year.

Did you know?

Medications that are definitely not safe to take when breastfeeding include radioactive drugs, antimetabolites, some cancer (chemotherapy) agents, bromocriptine, ergotamine, methotrexate, and cyclosporine.

Did you know?

Allergies play a major part in the health of children. The most prevalent childhood allergies are milk, egg, soy, wheat, peanuts, tree nuts, and seafood.

Did you know?

Drug abusers experience the following scenario: The pleasure given by their drug (or drugs) of choice is so strong that it is difficult to eradicate even after years of staying away from the substances involved. Certain triggers may cause a drug abuser to relapse. Research shows that long-term drug abuse results in significant changes in brain function that persist long after an individual stops using drugs. It is most important to realize that the same is true of not just illegal substances but alcohol and tobacco as well.

Did you know?

The longest a person has survived after a heart transplant is 24 years.

For a complete list of videos, visit our video library