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Explain why market labor demand curves are generally less elastic than an individual firm’s labor demand...

Explain why market labor demand curves are generally less elastic than an individual firm’s labor demand curves.

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Answer #1

When compared to the labour demand curve of individual firm's, the demand curve for an entire market is inelastic in nature.

That is the individual sum of labour demand faced by each firm remains more elastic when compared to the entire market's labour demand.

The main reason behind this is that, output prices changes based on the total output produced.

The market induces each individual firm's to hire more labour as they require producing more output. This will increase the supply of output but the output price decreases.

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