Labor Demand Is More Elastic the Greater the Elasticity of Demand

question 6

Multiple Choice

Labor demand is more elastic the greater the elasticity of demand for the firm's output because

• A) the firm would see its quantity demanded fall substantially if the firm tried to pass increased labor costs through to the consumer by increasing the price of the output good.
• B) the firm's output price falls when the firm produces less output.
• C) a firm that operates in a competitive output market cannot lower its price.
• D) capital is usually price elastic.
• E) the firm will want to hire fewer workers when the wage rate increases.

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Definitions:

Labour Markets

The supply and demand dynamics for labor, where employers seek to hire workers and workers look for employment.

Federal Government

The national government of a country, responsible for governing the entire nation and making decisions on federal matters.

Compensation Strategy

An organization’s approach to determining how to reward employees, incorporating elements such as pay levels, benefits, incentives, and performance evaluations.

Affordability

The degree to which something is financially viable or within one's financial means, often used in reference to budgeting and financial planning.