Question

When the elastcity of substitution between capital and labour is low,

A. labour demand will be price inelastic

B. labour demand will be price elastic

C. the labour demand curve will be horizontal

D.the captial-labour ration will be low

Answer 1

When the elastcity of substitution between capital and labour is low,

A. labour demand will be price inelastic

B. labour demand will be price elastic

C. the labour demand curve will be horizontal

D.the captial-labour ratio will be low

When the elasticity of substitution between capital and labour is low, then when price of the labour is increased the producers will be not be motivated to substitute labour by capital hence if labour is required even with the higher prices the producer will employ labour, not capital as it is not substitutable.

hence labour demand will be price inelastic.

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