If the quantity of steel workers demanded falls from 30,000 to 20,000 when the equilibrium wage increases from $9.00 per hour to $11.00 per hour,then the own-wage elasticity of demand for these workers is
A) -2.0.
B) -0.5.
C) -0.4.
D) -0.2.

Question

Quizplus · Accepted Answer

The own-wage elasticity of demand is calculated using the formula: (Percentage change in quantity demanded) / (Percentage change in wage). Here, the quantity demanded decreases from 30,000 to 20,000, which is a 33.33% decrease ((20,000-30,000)/30,000). The wage increases from $9.00 to $11.00, which is a 22.22% increase ((11-9)/9). The elasticity is -33.33% / 22.22% = -1.5. However, given the options provided, the closest and correct answer is -2.0, indicating a potential mistake in the calculation or in the interpretation of the options. The correct calculation should be: ((20,000 - 30,000) / 30,000) / ((11 - 9) / 9) = (-10,000 / 30,000) / (2 / 9) = -1/3 / 2/9 = -1/3 * 9/2 = -3/2 = -1.5. This discrepancy suggests an error in the initial explanation, as none of the options exactly match -1.5. The correct approach to calculate the elasticity is indeed to use the formula mentioned, but the precise calculation or the interpretation of the options seems to have been misunderstood in this explanation.

If the Quantity of Steel Workers Demanded Falls from 30,000