Elasticity of Demand for labour

Question 1

what is the elasticity of demand for labour also known as

Answer 1

wage elasticity demand for labour

Question 2

how do you calculate wage elasticity demand

Answer 2

%change in quantity demanded for labour/
%change in wage rate

Question 3

if W.E.D > 1 what is the demand relatively

Answer 3

relatively elastic/sensitive to wage change

Question 4

if W.E.D < 1 what is demand relatively

Answer 4

relatively inelastic/insensitive to wage change

Question 5

If wage rate increased by 10% and there was a -20% decrease in demand for labour what would the W.E.D be

Answer 5

It would be -2 but 2 because we ignore the - for demand because of the inverse relationship

Question 6

Why can firms be elastic to demand for labour
e.g. 2

Answer 6

The firm is labour intensive and most its costs are wages
New technology makes labour replaceable
The P.E.D for the GaS from which labour is derived is P.E.D > 1 this means that they can’t ‘lay off’ increase in labour onto the consumer

Question 7

If wage rate increased by 10% and there was a -5% decrease in demand for labour what would the W.E.D

Answer 7

it would be -0.5 the demand falls by half the increase

Question 8

What could make firms inelastic to demand for labour
e.g. 0.5

Answer 8

a captial intensive firm pay a small amount of total costs to wages
demand for GaS produced is P.E.D<1 so they can increase price of product and pay wages with this money

Question 9

what does the demand curve look like for elastic Wage elasticity of demand for labour

Answer 9

it would be a shallow curve - to show a greater change in quantity demanded then change in wage level

Question 10

what does the demand curve look like for inelastic wage elasticity of demand for labour

Answer 10

it would be a steep curve - to show a greater change in wage level then quantity demanded