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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 wage elasticity of labor supply is the percentage variation in the quantity of hours supplied divided by the percentage variation in the wage.

Step by step solution

01

Step 1. Definition:

Elasticity can be found in any market, not simply markets for commodities and services. The wage elasticity of labor supply鈥攖hat is, the percentage variation in hours worked divided by the percentage variation in wages鈥攚ill reflect the form of the labor supply curve in the labor market.

02

Step 2. Formula:

The formula required to compute the value of wage elasticity of labor supply is given below:

Wageelasticityoflaborsupply=%changeinquantityoflaborsupplied%changeinwage

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Most popular questions from this chapter

The equation for a supply curve is P = 3Q 鈥� 8. What is the elasticity in moving from a price of 4 to a price of 7?

Suppose the price elasticity of demand for heating oil is 0.2 in the short run and 0.7 in the long run.

a. if the price of heating oil rises from \(1.80 to \)2.20 per gallon, what happens to the quantity of heating oil demanded in the short run? In the long run? (Use the midpoint method in your calculations.)

b. Why might this elasticity depend on the time horizon?

32. Suppose you could buy shoes one at a time, rather than in pairs. What do you predict the cross-price elasticity for left shoes and right shoes would be?

A city has built a bridge over a river and it decides to charge a toll to everyone who crosses. For one year, the city charges a variety of different tolls and records information on how many drivers cross the bridge. The city thus gathers information about the elasticity of demand. If the city wishes to raise as much revenue as possible from the tolls, where will the city decide to charge a toll: in the inelastic portion of the demand curve, the elastic portion of the demand curve, or the unit elastic portion? Explain.

In competitive markets, farmers adopt new technologies that will eventually reduce their revenue because

a. each farmer is a price taker.

b. farmers are short-sighted.

c. regulation requires the use of best practices.

d. consumers pressure farmers to lower prices.
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