The introduction of new forms of capital generally
A) decreases the own-wage elasticity of labor demand.
B) increases the bargaining power of unions.
C) increases the own-wage elasticity of labor demand.
D) shifts the labor demand curve to the right.

Question

Quizplus · Accepted Answer

The introduction of new forms of capital leads to productivity increase, which results in a decrease in the relative cost of labor. This means that the own-wage elasticity of labor demand increases because employers can now substitute capital for labor more easily. As a result, employers become more responsive to changes in wages, and labor demand becomes more elastic.

The Introduction of New Forms of Capital Generally