By how much would the quantity of labor demanded decrease if a minimum wage hike raised prevailing wages from $8 to $10 an hour

Question

3 years ago

7

and if the elasticity of labor demand were 0.40?

1 answer:

Mademuasel [1] · Answer 1 · 2022-06-18T04:39:14+03:00

Answer:

it would decrease by 10%

Step-by-step 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

percentage change in price = ($10 - $8) / $8 = 0.25 x 100 = 25%

0.4 = percentage change in quantity demanded / 25%

percentage change in quantity demanded = 25% x 0.4 = 10%