Suppose that the demand for electricians in a particular town can be given by the equation: L = 10,000 - 20W where L = the number of hours of electrician services and W = the hourly wage rate for electricians. a. What is the own-wage elasticity of demand for electricians when W = $125 per hour -- the equilibrium wage rate? b. Is the demand curve elastic or inelastic at this point? c. How will Aggregate Earnings of electricians be affected by a 10% increase in wages from this equilibrium point? d. What effect will each of the following have on the own-wage elasticity of demand for electricians at the equilibrium wage? i. An increase in the price elasticity of demand for electrical services ii. An increase in the equilibrium wage (with the same labor demand curve specified in this problem) iii. A dramatic increase in handymen in this town (which can be thought of as substitutes in the production for electricians)
Suppose that the
a. What is the own-wage elasticity of demand for electricians when W = $125 per hour -- the equilibrium wage rate?
b. Is the demand curve elastic or inelastic at this point?
c. How will Aggregate Earnings of electricians be affected by a 10% increase in wages from this equilibrium point?
d. What effect will each of the following have on the own-wage elasticity of demand for electricians at the equilibrium wage?
i. An increase in the price elasticity of demand for electrical services
ii. An increase in the equilibrium wage (with the same labor demand curve specified in this problem)
iii. A dramatic increase in handymen in this town (which can be thought of as substitutes in the production for electricians)
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