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

Question

Quizplus · Accepted Answer

In the short run, firms are not able to easily substitute capital for labor, as they typically have fixed amounts of capital equipment and must use the available labor to produce output. In the long run, however, firms can adjust their capital stock to reduce their reliance on labor, making their labor demand more elastic.

Why Is the Short-Run Labor Demand Curve Less Elastic Relative