« previous next »

Author Question: If the price of automobiles was to increase, then A) the quantity of gasoline demanded would ... (Read 48 times)

jjjetplane

  • Hero Member
  • *****
  • Posts: 556
on: Jun 29, 2018
If the price of automobiles was to increase, then
 
  A) the quantity of gasoline demanded would decrease.
  B) the demand for gasoline would increase.
  C) the demand for gasoline would decrease.
  D) the supply of gasoline would increase.

Question 2

Suppose that the price of capital falls. Does this necessarily imply that the demand for laborwill fall? Explain.
 
  What will be an ideal response?
InMicro ¦ Hubbard, O'Brien ¦ 1st Edition
Buy Test-Bank


mathjasmine

  • Sr. Member
  • ****
  • Posts: 312
Reply #1 on: Jun 29, 2018
Answer to Question 1

C

Answer to Question 2

No. If the price of capital falls, the factor substitution effect suggests that the firm will substitute away from the more expensive input (labor) toward the cheaper input (capital). This means that the demand for labor would in fact decrease. However, the decrease in the price of capital will also lower the cost of production, leading the firm to produce more. This is the output effect. If the firm produces more, it needs a larger level of all inputs including labor. This would cause an increase in the demand for labor. The full effect on the demand for labor depends on the relative sizes of the two effects.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

Symptoms of kidney problems include a loss of appetite, back pain (which may be sudden and intense), chills, abdominal pain, fluid retention, nausea, the urge to urinate, vomiting, and fever.

Did you know?

Fewer than 10% of babies are born on their exact due dates, 50% are born within 1 week of the due date, and 90% are born within 2 weeks of the date.

Did you know?

Persons who overdose with cardiac glycosides have a better chance of overall survival if they can survive the first 24 hours after the overdose.

Did you know?

In the United States, there is a birth every 8 seconds, according to the U.S. Census Bureau's Population Clock.

Did you know?

Certain topical medications such as clotrimazole and betamethasone are not approved for use in children younger than 12 years of age. They must be used very cautiously, as directed by a doctor, to treat any child. Children have a much greater response to topical steroid medications.

Browning and Gunning demonstrated that placental transfer tissues increase plant reproductive succes Browning and Gunning demonstrated that placental transfer tissues increase plant reproductive succes
Increase in Obesity among U.S. Children and Adolescents Increase in Obesity among U.S. Children and Adolescents
U.S. Subsurface Coal Mining: Output, Price, and Output per Worker-Hour, 1949–1994 U.S. Subsurface Coal Mining: Output, Price, and Output per Worker-Hour, 1949–1994
Increase in Surface Area by Mechanical Weathering Increase in Surface Area by Mechanical Weathering
The net price of an article is $79.84. What is the list price if a discount of 23% was allowed? The net price of an article is $79.84. What is the list price if a discount of 23% was allowed?
Cost = $99.49; Rate of markup based on cost = 32%. Find the markup and selling price. Cost = $99.49; Rate of markup based on cost = 32%. Find the markup and selling price.
Video: Definitions of stroke volume, preload definition & Factors influencing stroke volume

For a complete list of videos, visit our video library