A change in the quantity demanded of a given factor of production will occur if:
A) the productivity of that factor decreases.
B) the productivity of that factor increases.
C) the price of that factor rises.
D) there is a decrease in the price of a substitute factor.

Question

Quizplus · Accepted Answer

A change in the price of a factor of production (in this case, an increase in price) will lead to a change in the quantity demanded of that factor. This is because firms will respond to the higher price by reducing their demand for the factor, either by using less of it or by finding substitutes. Factors of production with higher prices will increase the cost of producing goods or services, which in turn can impact their profitability. Therefore, firms will adjust their demand for factors depending on changes in their prices.

A Change in the Quantity Demanded of a Given Factor