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Question
In real life, the elasticity of substitution between factors of production is _________.
In real life, the elasticity of substitution between factors of production is _________.
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Solution
The correct option is D neither infinite nor zero
The four factors of production are not related to each other in most circumstances hence their elasticity of substitution is neither infinite or zero. But, in a few circumstances they are related. For example, as we move on in the 21st century labour and capital are starting to get related as there labour intensive and capital intensive industries.
The four factors of production are not related to each other in most circumstances hence their elasticity of substitution is neither infinite or zero. But, in a few circumstances they are related. For example, as we move on in the 21st century labour and capital are starting to get related as there labour intensive and capital intensive industries.
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