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.
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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.
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