The cross-elasticity of labor with respect to capital is
A)the change in labor relative to a change in capital.
B)the change in wages relative to a change in the price of capital.
C)the percent change in labor relative to a percent change in capital.
D)the percent change in wages relative to a percent change in the price of capital.
E)the percent change in labor relative to a percent change in the price of capital.

Question

Quizplus · Accepted Answer

Cross-elasticity measures the responsiveness of one factor to changes in another factor, while holding constant all other factors. In this case, the cross-elasticity of labor with respect to capital measures the percentage change in labor demand in response to a given percentage change in the price of capital. Therefore, the best choice is E, which represents the percent change in labor relative to a percent change in the price of capital.

The Cross-Elasticity of Labor with Respect to Capital Is