If the elasticity of labor is 0.60,a 15 percent increase in the wage rate will induce a
A)9.0 percent decrease in the quantity of labor supplied.
B)9.0 percent increase in the quantity of labor supplied.
C)4.0 percent decrease in the quantity of labor supplied.
D)4.0 percent increase in the quantity of labor supplied.

Question

Quizplus · Accepted Answer

The elasticity of labor is defined as the percentage change in the quantity of labor supplied divided by the percentage change in the wage rate. With an elasticity of 0.60, a 15 percent increase in the wage rate will lead to a 9 percent (0.60 * 15%) increase in the quantity of labor supplied.

If the Elasticity of Labor Is 0