Economics: Principles, Problems, and Policies, 19th Edition

Published by McGraw-Hill Education
ISBN 10: 0073511447
ISBN 13: 978-0-07351-144-3

Chapter 12 - The Demand for Resources - Questions - Page 263: 4b

Answer

The price increase of D will increase the demand for C by the substitution effect. The demand of all factors will fall though due to the output effect. Therefore the net effect is uncertain until both are compared and determined which outweighs the other.

Work Step by Step

To understand this question you have to understand the output effect, substitution, and complimentary effect of resources.
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