Assume that the coefficient of elasticity of product demand is 0.5 in industry A and is 3.2 in industry B. Other things equal, labor demand will be
A)more elastic in industry A than in B.
B)relatively elastic in both industries A and B.
C)more elastic in industry B than in A.
D)relatively inelastic in both industries A and B.

Question

Quizplus · Accepted Answer

Labor demand elasticity is directly related to product demand elasticity. Since industry B has a higher product demand elasticity (3.2) compared to industry A (0.5), labor demand will also be more elastic in industry B.

Assume That the Coefficient of Elasticity of Product Demand Is