Elasticities of labour

Question 1

Elasticity of labour demand

Answer 1

Measures the responsiveness of labour demanded given a change in the wage rate.

Question 2

Factors which affect elasticity of labour demand

Answer 2

• Substitutability of capital (capital substitutable, elastic)
• Elasticity of good (elastic good, elastic labour demand- pass on costs with higher prices)
• Cost of labour of total costs (higher labour costs, more elastic)
• Time (long run, elastic)

Question 3

Elasticity of labour supply

Answer 3

Measures the responsiveness of labour supply given a change in the wage rate.

Question 4

Factors which affect elasticity of labour supply

Answer 4

• The nature of skills required (specific skills make it hard to transfer into the industry).
• Length of training period (longer more wage inelastic)
• Vocational (more vocational jobs like teaching more wage inelastic).
• Time (long run, elastic)