The Relationship Between the Elasticity of Product Demand and the Elasticity

question 319

Multiple Choice

The relationship between the elasticity of product demand and the elasticity of demand for labor employed in its production is such that, other things being equal,

• A)the more elastic the demand for the product, the less elastic the demand for labor.
• B)the more elastic the demand for the product, the more elastic the demand for labor.
• C)the elasticity of product demand only affects the elasticity of labor demand when the product market is purely competitive.
• D)if product demand is perfectly elastic, labor demand will be perfectly inelastic.

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Definitions:

ATC

Average Total Cost, which is the total cost of production divided by the quantity of output produced, a key concept in microeconomic analysis.

Marginal Cost

The cost added by producing one additional unit of a product or service, crucial in decision-making on production and pricing.

Fixed Cost

Costs that remain constant regardless of the amount of goods produced or sold, including expenses like lease payments, employee wages, and insurance fees.

Variable

A characteristic, number, or quantity that can change or vary, taking on different values in a mathematical model, statistical experiment, or real-life situation.