Elasticity of Labour Demand Flashcards
1
Q
What is the elasticity of demand for labour?
A
how responsive demand for labour is to changes in wage
2
Q
What three things affect the elasticity of labour demand?
A
substitutes
% of total cost
time
3
Q
Substitutes
A
how easy it is to replace workers when their wages go up
hard to substitute = inelastic
4
Q
% of total cost
A
what % of total cost is made up by workers’ wages
small % = inelastic
(as if wages increased by small amount, firm would be unresponsive)
5
Q
Time
A
short run - no time to find substitutes = inelastic
6
Q
inelastic demand =
A
higher wages
