Different capital intensity in different industries is mainly explained by _______ and ________?
Correct answer: B. technology, the ease of factor substitution
- A. wage differentials, skill levels
- B. technology, the ease of factor substitution
- C. government grants, international competition
- D. patents, skill shortages
Explanation
Industries use different capital intensities because their technologies differ and because they differ in how easily capital can substitute for labour. If substitution is difficult, firms need a relatively fixed combination of both factors.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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