Why is the short run labor demand curve less elastic relative to the long run labor demand curve?
A) Firms care about changes in wages in the short run but not in the long-run.
B) Firms are better able to substitute capital for labor in the long run compared to the short run.
C) Labor is a normal good.
D) A perfectly competitive firm can always pay lower wages in the long run.
E) Isoquant lines get shallower when the wage increases.

Question

Quizplus · Accepted Answer

In the long run, firms have more flexibility to adjust their production processes and inputs, including substituting capital for labor, making the demand for labor more elastic. In the short run, these adjustments are more difficult or costly to implement.

Why Is the Short Run Labor Demand Curve Less Elastic