Question

Question #3: If instead of the situation given in the Work It Out problem, the price of manufacturing were to fall by 20%, would landowners or capital owners be better off? Explain. How would the decrease in the price of manufacturing affect labor? Explain.

Answer 1

3) If the price of manufacturing which means cost of production were to fall by 20%, the landowners or capital owners would definetely be better off. As they are the real stakeholder who were expecting returns as dividends and rent. And when the cost of production is reduced it will lead to increase in profite which will in turn increase their returns. Although, the decrease in the price of manufacturing would hardly affect labor or will be in very less proportion as the owners and manufacturers tend to hold amount for themselves first.