Demand for labour is more likely to be wage inelastic if ?
Correct answer: A. Wages are a small proportion of total costs
- A. Wages are a small proportion of total costs
- B. Demand for the final product is price elastic
- C. It is easy to replace labour
- D. Capital is a good substitute for labour
Explanation
Labour demand is less responsive to wage changes when wages form only a small share of total costs, because labour-cost changes have little effect on total production cost. Easy substitution and elastic product demand would make labour demand more wage elastic.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
Practise Microeconomics
1,742 free Microeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Microeconomics questions
Occupational immobility of labour occurs if ?
A minimum wage law tends to ?
If, for any reason the wage is held above the competitive equilibrium wage?
A decrease in the supply of labour is likely to lead to ?
Which of the following types of unemployment will exist even if the wage is at the competitive equilibrium ?
Which of the following statements about efficiency wage theory is true ?