If consumption demand rises but firms cannot increase factor services, what may be limited?
Answer and explanation
Correct answer: Expansion of output
Firms need factor services such as labour, land, capital, and entrepreneurship to produce goods and services. A rise in consumption demand encourages firms to expand production, but that expansion requires additional or more intensively used factor services. If the supply or use of these services cannot increase, productive capacity becomes a constraint. Therefore, expansion of output may be limited even when demand is rising.
Frequently asked questions
What is the correct answer to this question?
Expansion of output
Why is this the correct answer?
Firms need factor services such as labour, land, capital, and entrepreneurship to produce goods and services. A rise in consumption demand encourages firms to expand production, but that expansion requires additional or more intensively used factor services. If the supply or use of these services cannot increase, productive capacity becomes a constraint. Therefore, expansion of output may be limited even when demand is rising.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
Student feedback
Was this question useful?
👍 0 Helpful 👎 0 Not helpful
Yes 0% No 0%
0 responsesStudent Reviews
No published reviews yet.
