Labor is typically assumed to be the only variable input in very short-run production systems, and the number of variable inputs increases as we lengthen our planning horizon from short run to long run. What happens to the labor demand curve as we move from short run to long run?
A) Demand curve becomes less elastic.
B) Demand curve elasticity does not change.
C) Demand curve becomes more elastic.
D) Demand curve becomes upward sloping.

Question

Quizplus · Accepted Answer

In the short run, the demand for labor is typically inelastic because businesses have a fixed level of capital and cannot easily adjust their output or production processes. As we move from short run to long run, businesses can adjust their capital inputs and production processes, making the demand for labor more elastic. Therefore, the demand curve becomes more elastic in the long run.

Labor Is Typically Assumed to Be the Only Variable Input