According to the output effect in the resource market, the firm will buy more of a specific input when the price of the other input decreases and less of that specific input when the price of the other input increases.
output effects in the market for resources
The output effect happens when a company can produce additional products using a lower-cost input, increasing the demand for the resource. Unsurprisingly, the relative importance affects the net result of substitution and output. Demand will decrease for a specific resource if the substitution effect is more significant, and vice versa. There will be more demand for the resource if the output effect is more pronounced.
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