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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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