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linyuki linyuki
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A year ago
The principle of substitution plays a central role in resource allocation because it demonstrates that

▸ methods of producing the same commodity will not differ from one country to another.

▸ prices will be relatively low for those factors for which demand is high relative to supply.

▸ relative factor prices reflect relative scarcities of factors in the economy and so firms will find it profitable to make abundant use of relatively abundant factors.

▸ firms will find it profitable to make abundant use of relatively scarce factors.

▸ firms can use all factors of production interchangeably with no impact on their costs.
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Microeconomics

Microeconomics


Edition: 17th
Author:
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rick32rick32
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A year ago
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linyuki Author
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You make an excellent tutor!
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