6. Suppose capital and labor are used in fixed proportions so that each machine requires only one worker. Ifa decline in the price of capital occurs, then the demand for labor will A. decline solely because of the substitution effect. B. increase solely because of the substitution effect C. increase solely because of the output effect. D. decrease solely because of the output effect Solution Ans is C A decline in price of capital will have no substitution effect because of perfect complementary nature of labor and capital. Thus substitution effect will be zero. Bit output effect will make the demand of both labor and capital to imcrease..