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Chapter 9: Labor demand (page 327)

How does a change in technology affect the demand for labor?

Short Answer

Expert verified

it has effects that could increase or decrease the demand for labor.

Step by step solution

01

Labor demand 

Changes in technology can cause the demand for labor to both increase as well as decrease depending on the situation. If technological changes make labor more productive relative to the factors of production utilized such as capital, then firms would demand an increased amount of workers and substitute the other factors of production with new labor.

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Most popular questions from this chapter

What is the inverse relationship in the demand for labor curve?

The domestic supply and demand curves for hula beans are as follows:

Supply: P = 50 + Q

Demand: P = 200 - 2Q

where P is the price in cents per pound and Q is the quantity in millions of pounds. The U.S. is a small producer in the world hula bean market, where the current price (which will not be affected by anything we do) is 60 cents per pound. Congress is considering a tariff of 40 cents per pound. Find the domestic price of hula beans that will result if the tariff is imposed. Also compute the dollar gain or loss to domestic consumers, domestic producers, and government revenue from the tariff.

Currently, the social security payroll tax in the United States is evenly divided between employers and employees. Employers must pay the government a tax of 6.2 percent of the wages they pay, and employees must pay 6.2 percent of the wages they receive. Suppose the tax were changed so that employers paid the full 12.4 percent and employees paid nothing. Would employees be better off?

What is the difference between demand for labor and supply of labor?

Among the tax proposals regularly considered by Congress is an additional tax on distilled liquors. The tax would not apply to beer. The price elasticity of supply of liquor is 4.0, and the price elasticity of demand is -0.2. The cross-elasticity of demand for beer with respect to the price of liquor is 0.1.

a. If the new tax is imposed, who will bear the greater burden—liquor suppliers or liquor consumers? Why?

b. Assuming that beer supply is infinitely elastic, how will the new tax affect the beer market?
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