In an industry,when the price of electricity goes up,the company employs more low-skilled workers.This implies
A) the substitution effect dominated the scale effect.
B) the scale effect dominated the substitution effect.
C) the substitution effect worked in the same direction as the scale effect.
D) the scale effect was positive.

Question

Quizplus · Accepted Answer

When the price of electricity goes up, the company is likely to substitute more expensive capital and skilled labor with cheaper low-skilled labor. This implies that the substitution effect is dominating the scale effect, leading to an increase in the demand for low-skilled labor.

In an Industry,when the Price of Electricity Goes Up,the Company