Asked by Enrique Cuevas on Jun 09, 2024
Verified
If resources A and B are complementary and employed in fixed proportions,
A) a change in the price of A will have no effect on the quantity of B employed.
B) an increase in the price of A may either increase or decrease the demand for B.
C) an increase in the price of A will increase the demand for B.
D) an increase in the price of A will decrease the demand for B.
Complementary Resources
Resources used together in production that increase each other's effectiveness.
Fixed Proportions
A production condition where inputs must be combined in strict, unchanging ratios to produce output.
- Review the impact of input price alterations on how resources are distributed and the activities of enterprises.
- Analyze the impact that variations in input prices have on both substitution and output effects.
Verified Answer
MB
Mario BravoJun 14, 2024
Final Answer :
D
Explanation :
When resources A and B are complementary and used in fixed proportions, an increase in the price of A makes it more expensive to use both resources together, thus decreasing the demand for resource B as well.
Learning Objectives
- Review the impact of input price alterations on how resources are distributed and the activities of enterprises.
- Analyze the impact that variations in input prices have on both substitution and output effects.