Question

Most labor economists believe that the supply of labor is a. less elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax. b. more elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax. c. more elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. d. less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax.

Answer 1

Answer:

d

Explanation:

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.

Price elasticity of demand = percentage change in quantity demanded / percentage change in price  

If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.  

Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one

Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.  

Infinitely elastic demand is perfectly elastic demand. Demand falls to zero when price increases  

Perfectly inelastic demand is demand where there is no change in the quantity demanded regardless of changes in price.

The supply of labour usually exceeds the demand for labour. So, the supply of labour is less elastic. as a result workers bear the burden of tax