If wages increase at a 5% rate and the quantity demanded of labor decreases by 10%, then the elasticity of demand for labor is

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Quizplus · Accepted Answer

The elasticity of demand for labor is calculated as the percentage change in quantity demanded divided by the percentage change in price (or wages, in this case). Here, it's (-10%) / 5% = -2. The negative sign indicates the inverse relationship between wage and quantity demanded, but the magnitude (2) shows the elasticity.

If Wages Increase at a 5% Rate and the Quantity