If a factor of production has many close substitutes, we would expect that its price elasticity of demand would be
A) unity.
B) zero.
C) greater than one.
D) less than one, but greater than zero.

Question

Quizplus · Accepted Answer

If a factor of production has many close substitutes, then the demand for the factor is likely to be more elastic, meaning that a small change in the price would result in a large change in the quantity demanded. This is because buyers have more options to choose from, making them more sensitive to price changes. Therefore, we would expect the price elasticity of demand to be greater than one.

If a Factor of Production Has Many Close Substitutes, We