Labor Demand Is More Elastic the Greater the Elasticity of Substitution

Labor demand is more elastic the greater the elasticity of substitution between labor and capital because

A) workers supply more labor when their wage increases.
B) the firm's output price falls when the firm produces more output.
C) a firm is less willing to pay higher labor costs if it is easy for the firm to substitute capital for labor.
D) firms always have the option of substituting capital for labor.
E) a firm's technology is slow to change.

Correct Answer:

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