If the cost of a particular factor of production accounts for a large percentage of the total cost of producing some good, we can expect the demand for this factor of production to
A) be relatively elastic.
B) have an elasticity equal to zero.
C) be perfectly inelastic.
D) have an elasticity equal to one.
E) be relatively inelastic.

Question

Quizplus · Accepted Answer

When a factor of production accounts for a large percentage of total production costs, producers are more sensitive to changes in its price, leading to a relatively elastic demand for that factor.

If the Cost of a Particular Factor of Production Accounts