does not change, in which case technology 2 is the low-cost production technology. If wages keep rising up to

$90, while the cost of machines remains unchanged, then technology 3 clearly becomes the low-cost form of

production, as example C shows.

This example shows that as an input becomes more expensive (in this case, the labor input), firms will attempt

to conserve on using that input and will instead shift to other inputs that are relatively less expensive. This

pattern helps to explain why the demand curve for labor (or any input) slopes down; that is, as labor becomes

relatively more expensive, profit-seeking firms will seek to substitute the use of other inputs. When a

multinational employer like Coca-Cola or McDonald’s sets up a bottling plant or a restaurant in a high-wage

economy like the United States, Canada, Japan, or Western Europe, it is likely to use production technologies
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