The relationship between the elasticity of product demand and the elasticity of demand for labor employed in its production is such that, other things being equal,
A)the more elastic the demand for the product, the less elastic the demand for labor.
B)the more elastic the demand for the product, the more elastic the demand for labor.
C)the elasticity of product demand only affects the elasticity of labor demand when the product market is purely competitive.
D)if product demand is perfectly elastic, labor demand will be perfectly inelastic.

Question

Quizplus · Accepted Answer

The more elastic the demand for a product, the more sensitive the quantity demanded is to price changes. This sensitivity extends to the production process, meaning that if the demand for a product is highly elastic, the demand for labor to produce that product will also be more elastic. This is because changes in the cost of labor (which can affect the price of the product) will more significantly impact the quantity of the product demanded, thereby affecting the demand for labor.

The Relationship Between the Elasticity of Product Demand and the Elasticity