For a given labor supply, would the potential unemployment impact of an increase in the minimum wage be greater in the case of elastic or inelastic demand for labor? Explain why, using hypothetical numbers to illustrate your case.
2007-05-17 15:23:41 · 5 answers · asked by Kristin_80 1 in Social Science ➔ Economics
The impact on unemployment would be greater if the demand for labor was elastic. Inelastic demand would mean that no matter how much the minimum wage was, employers would still be more likely to pay it. Elastic demand means the cost of labor would have a large effect on the number of workers hired.
2007-05-17 15:39:33 · answer #1 · answered by SA 4 · 0⤊ 0⤋
Do you really understand supply side economics? It is not simply about reducing taxes on business owners; it focuses on both policies that help raise capital for new and expanding businesses and on the costs of production. The "conventional wisdom" is not always correct. So you would rather government go to all of the trouble and expense and administrative cost to tax a business and then spend money with businesses instead of just letting businesses keep their own hard-earned money to begin with? That doesn't make much sense, either.
2016-03-19 07:34:47 · answer #2 · answered by Daniela 4 · 0⤊ 0⤋
Elasticicy of demand for labor measures the sensitivity of the quantity of labor demanded to an increase in the price of labor (i.e., the wage rate).
If the demand for labor is elastic, then an x% increase in the wage rate decreases the quantity of labor demanded by more than x%. But if the demand for labor is inelastic, then an x% increase in the wage rate decreases the quantity of labor demanded by less than x%.
Accordingly, an increase in the minimum wage reduces the quantity of labor demanded more when the demand for labor is elastic than it does when the demand is inelastic.
So an increase in the minimum wage increases unemployment more when the demand for labor is elastic than it does when the demand for labor is inelastic.
2007-05-17 15:44:21 · answer #3 · answered by helper 7 · 0⤊ 0⤋
elastic demand for labor means a change in wages results in a large change in demand. So lots more unemployed.
inelastic demand for labor means a change in wages results in a small change in demand. So not a big change to unemployed.
2007-05-17 15:43:48 · answer #4 · answered by JuanB 7 · 0⤊ 0⤋
Scroll down about 7 questions. Apparently one of your classmates is online too.
2007-05-17 15:28:09 · answer #5 · answered by Bjorkmeister 5 · 0⤊ 0⤋