Question

Suppose a country has two inputs, capital and labor, and is abundant in labor. The country...

Suppose a country has two inputs, capital and labor, and is abundant in labor. The country then experiences an increase in the size of its labor force. We would then expect

capital to be made better off
labor to be made better off
capital to be worse off
no change in the economy
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Answer #1

Correct option is capital to be worse off

Suppose a country has two inputs, capital and labor, and is abundant in labor. The country then experiences an increase in the size of its labor force. With the increase in the size of labor force, it will put pressure on capital because it not increased commensurate with the labor force. Therefore, it will lead capital to be worse off. With the fixed capital, increased labor makes less capital available to each worker, hence it result in worsening off capital.

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