In which of the cases given below will the elasticity of demand for workers who produce yo-yos be most inelastic? The price elasticity of demand for yo-yos is
A)5, and labor's share of total costs is 20 percent.
B)5, and labor's share of total costs is 75 percent.
C)0.1, and labor's share of total costs is 20 percent.
D)0.1, and labor's share of total costs is 75 percent.

Question

Quizplus · Accepted Answer

The elasticity of demand for workers is most inelastic when the price elasticity of demand for the product is low (indicating that the quantity demanded of the product is not very responsive to price changes) and when labor's share of total costs is low (indicating that changes in wages have a smaller impact on total costs and thus on the quantity of labor demanded). Option C, with a price elasticity of demand for yo-yos of 0.1 and labor's share of total costs at 20 percent, meets these conditions.

In Which of the Cases Given Below Will the Elasticity