The mobility of the factors of production refers to how easily firms can switch between different factors of production during the production process
The more mobile the factors, the more flexibility there will be in production
E.g. if a firm can produce both cars & trucks on its production line & switching from one to the other only requires a few simple changes to some robotic arm extensions, then its capital is very mobile
This means that the firm can be very responsive to changes in demand for cars & trucks & is likely to make more profit
Labor is often one of the most expensive costs of production
If firms can substitute capital (machinery) for labor, productivity often increases & costs decrease
Many firms rely heavily on labor & ensuring labor mobility helps to lower unemployment & reduce worker shortages in an economy
Two Factors That Cause Labor To Be Less Mobile
