Suppose that a union successfully negotiated a 14 percent wage increase and the quantity of labor demanded decreased by 10 percent. Given a fixed labor demand curve, we can conclude that

A) the labor demand curve is upsloping.
B) labor demand is elastic.
C) labor demand is inelastic.
D) the coefficient of elasticity of labor demand is equal to 1.

Question

Min Ji CHUNG · Accepted Answer

Final Answer : C, Explanation :  Labor demand is considered inelastic when the percentage change in quantity demanded is less than the percentage change in price (or wage, in this case). Since a 14 percent wage increase led to only a 10 percent decrease in labor demanded, this indicates inelastic demand.

Definitions

Learning Objectives

Learning Objectives

Related questions