Consider the following demand and supply curves in factor markets.
FIGURE 13- 5
-The demand for a factor will be more elastic if
A)the demand for the good being produced is inelastic.
B)there is little substitutability between factors.
C)that factor determines a small percentage of total cost.
D)it is easier to substitute between this factor and others.
E)the supply of the factor is elastic.

Question

Consider the following demand and supply curves in factor markets.
  FIGURE 13- 5
-The demand for a factor will be more elastic if
A)the demand for the good being produced is inelastic. 
B)there is little substitutability between factors. 
C)that factor determines a small percentage of total cost. 
D)it is easier to substitute between this factor and others. 
E)the supply of the factor is elastic.

Quizplus · Accepted Answer

The more easily a factor can be substituted for another, the more elastic its demand will be. This is because if the price of one factor increases, firms can switch to using a substitute factor, thereby reducing the demand for the original factor. Therefore, option D - it is easier to substitute between this factor and others - is the correct answer.

Consider the Following Demand and Supply Curves in Factor Markets