Asked by Dolly Rodriguez on Jun 09, 2024
Verified
Suppose that the labor cost to total cost ratio in industry A is 82 percent, while in industry B it is 21 percent. Other things equal, labor demand will be
A) more elastic in industry A than in B.
B) relatively inelastic in both industries A and B.
C) more elastic in industry B than in A.
D) relatively elastic in both industries A and B.
Labor Cost
The total expenditure incurred by a company to pay its employees, including wages, benefits, and taxes.
Total Cost Ratio
Represents the sum of all costs (fixed and variable) associated with production, expressed as a ratio over a specific period.
- Determine the impact of product demand elasticity on the elasticity of labor demand within specific industries.
Verified Answer
KG
Kiley GoodieJun 10, 2024
Final Answer :
A
Explanation :
Labor demand elasticity is higher in industries where labor costs constitute a larger portion of total costs. Since industry A has a higher labor cost to total cost ratio (82%) compared to industry B (21%), labor demand in industry A will be more elastic. This is because changes in wages will have a more significant impact on total costs and, consequently, on the quantity of labor demanded in industry A.
Learning Objectives
- Determine the impact of product demand elasticity on the elasticity of labor demand within specific industries.
Related questions
Assume That the Coefficient of Elasticity of Product Demand Is ...
Elasticity of Resource Demand Is Measured by Dividing Percentage Change ...
The Less the Elasticity of Product Demand, the Greater the ...
The More Elastic the Demand for a Product, the Less ...
If a Firm's Demand for Labor Is Elastic, a Union-Negotiated ...