When the wage was $10 per hour, a group of workers supplied 30 hours of work per week on average. The wage then increased to $12 per hour, and the same group of workers supplied 33 hours of work per week on average. What is the elasticity of labor supply for this group of workers?

Question

Quizplus · Accepted Answer

The elasticity of labor supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. Here, the quantity supplied increased from 30 to 33 hours, a change of 3 hours on a base of 30 hours, which is a 10% increase. The wage increased from $10 to $12, a change of $2 on a base of $10, which is a 20% increase. Therefore, the elasticity of labor supply is 10% / 20% = 0.5.

When the Wage Was $10 Per Hour, a Group of Workers