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If capital becomes cheaper relative to labor, one would expect producers to substitute capital in place...

If capital becomes cheaper relative to labor, one would expect producers to substitute capital in place of labor in the production process. Describe an industry where you have observed this occurring.

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Answer #1

Labour and capital are used based on the productivities and prices of these factors. When there is fall in the cost of capital, the producer will substitute the capital for the labor.

For example , now the capital is being used increasingly in the agricultural sector as now capital or machines are becoming cheaper. Cheaper capital leads to the maximization of profits .

Further in the road construction as well, the capital is being used increasingly while labour usage is declining.

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