Think of what your current wage is how many hours you typically work per month. Suppose...
Think of what your current wage is how many hours you typically work per month. Suppose your wage at your current job increased by 25% and you could work as many hours as you wanted at the job.
i. In percentage terms, what would be the percentage change in the number of hours you would choose to work?
ii. Based on your answer in part i., what is your price elasticity of supply of labor?
Homework Answers
1.
I would like to work for 20% more of the existing work hours so that I can maximize the earnings. So, % increase in number of work hours, is 20%.
2.
Price elasticity of supply of labor = % change in labor supplied / % change in wages
Price elasticity of supply of labor = 20% / 25%
Price elasticity of supply of labor = .80
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