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Chapter 5: Q.23 (page 130)

What is the formula for the wage elasticity of labor supply?

Short Answer

Expert verified

The percentage change in the number of hours supplied divided by the percentage change in the wage is the wage elasticity of labor supply.

Step by step solution

01

Concept

The wage elasticity of labor supply refers to how sensitive labor supply is to wage rate changes. This is influenced by specific skills and educational requirements: the more sophisticated the skills and the higher, or longer to obtain, the requisite qualifications, the more inelastic the supply.

02

Explanation

The wage elasticity of labor supply is calculated by dividing the percentage change in the number of hours supplied by the percentage change in the wage. The elasticity of savings with respect to interest rates is calculated by dividing the percentage change in savings by the percentage change in interest rates.

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Most popular questions from this chapter

What is the relationship between price elasticity and position on the demand curve? For example, as you move up the demand curve to higher prices and lower quantities, what happens to the measured elasticity? How would you explain that?

Assume that the supply of low-skilled workers is fairly elastic, but the employers’ demand for such workers is fairly inelastic. If the policy goal is to expand employment for low-skilled workers, is it better to focus on policy tools to shift the supply of unskilled labor or on tools to shift the demand for unskilled labor? What if the policy goal is to raise wages for this group? Explain your answers with supply and demand diagrams.

Describe the general appearance of a demand or a supply curve with infinite elasticity.

Can you think of an industry (or product) with near-infinite elasticity of supply in the short term? That is, what is an industry that could increase Qs almost without limit in response to an increase in the price?

If demand is inelastic, will shifts in supply have a larger effect on equilibrium price or on quantity?
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