Suppose there are four industries. Labor costs are 80 percent of total costs in industry A, 60 percent in B, 45 percent in C, and 10 percent in D. In which of these industries will a 10 percent increase in the price of labor reduce quantity demanded of labor by the largest proportion?

Question

Quizplus · Accepted Answer

In industry A, labor costs account for a larger proportion of total costs than in the other industries. Therefore, a 10% increase in the price of labor will have the largest impact on total costs and reduce quantity demanded of labor by the largest proportion.

Suppose There Are Four Industries