What will the elasticity of resource demand be if unit wages rise by 5 percent and the number of employed workers falls by 12 percent?
A) 0.42
B) 1.60
C) 2.40
D) 6.00
Elasticity of resource demand is the absolute value of the percentage change in quantity of workers divided by the percentage change in resource price.In this case,elasticity is |-0.12/0.05| = 2.40.

Question

Quizplus · Accepted Answer

The elasticity of resource demand is calculated as the absolute value of the percentage change in quantity of workers divided by the percentage change in resource price. In this case, the unit wages have increased by 5%, leading to a rise in resource price. As a result, the number of employed workers has fallen by 12%. Therefore, the elasticity of resource demand is |-0.12/0.05| = 2.40. This means that a 1% increase in wages will lead to a 2.40% decrease in the quantity of workers demanded. Hence, the best choice is option C, which represents an elasticity value of 2.40.

What Will the Elasticity of Resource Demand Be If Unit