ABSTRACT
Changes in the price of energy can affect employment and output because the efficient mix of resources used in production changes. The amount of energy used in production should fall after an increase in its price, but what would happen to the use of other resources is not always clear. Resources that are substitutes for energy would be used relatively more, and resources that are complementary with energy would be used relatively less, while absolute levels of resource use depend on the scale of economic activity. The new combination of resources prompted by an energy price change will not likely be as productive as the old combination. Moreover, some resources may also become unemployed because their services are no longer as valuable and their prices do not fall enough to warrant their reabsorption in production.
