Question

The share of labor costs in total costs affects the own-wage elasticity of demand for labor...

The share of labor costs in total costs affects the own-wage elasticity of demand for labor by affecting the magnitude of:

A.

both the substitution and scale effects associated with a change in the wage.
B.

the substitution effect associated with a change in the wage.
C.

Neither the substitution effect nor the scale effect associated with a change in the wage.
D.

the scale effect associated with a change in the wage.
Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The own-wage elasticity of demand for labor is the percentage change in employment due to a 1% change in the wage rate. The relationship is negative, because an increase in the wage rate reduces employment, while a decrease in the wage rate increases employment. The absolute value of the elasticity is high when share of labor costs in total costs is high.

So, the share of labor costs in total costs affects the own-wage elasticity of demand for labor by affecting the magnitude of the scale effect associated with a change in the wage.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Industry A has own-wage elasticity of labor demand of -2.5. Industry B has own-wage elasticity of...
Industry A has own-wage elasticity of labor demand of -2.5. Industry B has own-wage elasticity of labor demand of -0.5. Which industry is more likely to be unionized? Explain why. Suppose that a 5% increase in carpentersʹ wages causes a 1% drop in demand for plumbers. What is the cross-wage elasticity of demand for plumbers with respect to the wage of carpenters? Based on your calculation, are plumbers and carpenters gross substitutes or gross complements? Briefly explain.
1)Empirical estimates of own-wage labor elasticity of labor demand vary across different groups. Predict the kind...
1)Empirical estimates of own-wage labor elasticity of labor demand vary across different groups. Predict the kind of differences that you would expect (higher than or lower than) in the own-wage elasticity of labor demand between the following groups. a) males and females b) young (20-30) and older men(60+) c) high-school graduates and college graduates 2)Young workers with little experience are generally more susceptible to company layoffs than older and more experienced workers. Can you explain this phenomenon?
The price elasticity of demand for labor in economy A is 0.15. The price elasticity of...
The price elasticity of demand for labor in economy A is 0.15. The price elasticity of demand for labor in economy B is 1.7. In both economies the minimum wage is increased from $12 to $14 per hour. Will there be a significant drop in employment in economy A? Will there be a significant drop in employment in economy B? Explain your answers.
In this problem, you can assume all solutions are interior. Suppose the hourly wage is $20...
In this problem, you can assume all solutions are interior. Suppose the hourly wage is $20 and the price of each unit of capital is $20. The price of output is constant at $40 per unit. The production function is f(E,K) = E^1/6 K^1/2 (a) If the current capital stock is fixed at 36 units, how much labor should the firm use in the short run? How much profit will the firm earn? (b) How much labor and capital should...
A decrease in the price of capital will cause a firm to use more labor: A....
A decrease in the price of capital will cause a firm to use more labor: A. regardless of the relative size of the substitution and scale effects. B. under no circumstances. C. if the scale effect is larger than the substitution effect. D. if the substitution effect is larger than the scale effect. E. only in the short run.
1. The average product of labor is calculated as a)total revenue divided by the number of...
1. The average product of labor is calculated as a)total revenue divided by the number of workers employed. B)total output divided by the number of workers employed. C)the change in output divided by the change in labor D wages multiplied by the number of workers. 2.Input demand curves slope downward due to the A)output effect of a factor price increase B)factor substitution effect C)output effect of a factor price decrease D)all of the above
1) (10 marks) Which of these factors would shift the labor demand curve out (increase labor...
1) Which of these factors would shift the labor demand curve out (increase labor demand)? a) Decrease in immigration into the United States. b) Increase in immigration into the United States c) Price of output good increases (labor is used to make this output). d) Price of output good decreases (labor is used to make this output). 2) If the marginal revenue product of labor is greater than the wage rate (M RPh > w), what should a profit maximizing...
Suppose the own price elasticity of demand for good X is -5, its income elasticity is...
Suppose the own price elasticity of demand for good X is -5, its income elasticity is 1, its advertising elasticity is 3, and the cross-price elasticity of demand between it and good Y is 4. Determine how much the consumption of this good will change if: a) The price of good X decreases by 5 percent. _____% b) The price of good Y increases by 8 percent. _____% c) Advertising decreases by 2 percent. _____% d) Income increases by 4...
Question 1 The following is the MOST PRECISE definition of the Own Price Elasticity of Demand:...
Question 1 The following is the MOST PRECISE definition of the Own Price Elasticity of Demand: Question 1 options: A. Is the measure of how sensitive is the consumer to change in prices. B. It measures the slope of the demand curve. C It measures the percentage change in quantity demanded of good x as a result of a percentage change in price per unit of good x. D. It measures the total change in quantity demanded of good x...
1. The effect of a shift in the supply of labor on the equilibrium wage rate...
1. The effect of a shift in the supply of labor on the equilibrium wage rate will be the greatest if the wage elasticity of demand for labor is? A. -0.1 B. -0.5 C. -1 D. -5 2. What does an appreciation of the pound-dollar exchange rate mean? A. There are more pounds in circulation domestically B. A pound has more purchasing power domestically C. A pound is worth more in dollars D. A pound is worth more against all...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT