Question

Suppose firms can prepare tax returns using labor or computerized programs. If the price of labor increases, the quantity of labor demanded will ________, and the demand for computerized programs will ________.

Answer 1

If the price of labor increases, the quantity of labor demanded will decrease, and the demand for computerized programs will increase.

Step-by-step explanation:

If the price of labor increases, the quantity of labor demanded will decrease and the demand for computerized programs will increase. This is because when the price of labor increases, firms will find it more expensive to hire labor, causing them to reduce the quantity of labor they demand. In response to this, firms may choose to use computerized programs instead to replace some of the labor, leading to an increased demand for computerized programs.