If the quantity of auto workers demanded decreases from 66,000 to 54,000 when the equilibrium wage increases from $12.00 per hour to $14.00 per hour,then the own-wage elasticity of demand for these workers is
A) inelastic.
B) elastic.
C) zero.
D) neither elastic nor inelastic.

Question

Quizplus · Accepted Answer

Calculate the own-wage elasticity of demand using the formula:
own-wage elasticity of demand = ((new quantity demanded - old quantity demanded) / ((new quantity demanded + old quantity demanded)/2)) / ((new wage - old wage) / ((new wage + old wage)/2))

Plugging in the given values, we get:
((54,000 - 66,000) / ((54,000 + 66,000)/2)) / (($14.00 - $12.00) / (($14.00 + $12.00)/2)) = (-12,000 / 60,000) / (2 / 13) = -0.3

Since the elasticity is greater than 1 in absolute value, the demand for auto workers is elastic.

If the Quantity of Auto Workers Demanded Decreases from 66,000