Suppose firms in an industry hire unskilled and skilled labor.Unskilled labor is

Question

Suppose firms in an industry hire unskilled and skilled labor.Unskilled labor is a substitute for a capital and skilled labor is a complement with capital.A decrease in the real price of capital would... a. Cause the demand for both kinds of labor to decrease.Wage rates of both kinds of labor would decrease too. b.cause the demand for unskilled labor to increase and the demand for skilled labor to decrease. The wage of unskilled labor would rise relative to the wage of skilled labor. c. cause the demand for labor to increase, raising wages of both skilled and unskilled labor. d. cause the demand for unskilled labor to decrease and the demand for skilled to increase. The wage of unskilled labor would decrease relative to the wage of skilled labor

Explanation / Answer

The answer is B Hope this helps

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