By referring to Figure 5.11(a), Explain the impact of the increase of the price of labor on

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By referring to Figure 5.11(a), Explain the impact of the increase of the price of labor on the cost-minimizing quantity of capital. What can you conclude about the relative strengths of the substitution and output effects as they relate to the demand for capital in this specific situation?

Figure 5.11a

30 20 15 Q125 10 Q100 Q75 12 5 7 15 30 Quantity of labor (L) Units of capital (K)

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Contemporary Labor Economics

ISBN: 978-1259290602

11th Edition

Authors: Campbell R. McConnell, Stanley L. Brue, David Macpherson

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