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Hi.I need answer for this quistion.Br/Ha a) What measure can we use to empirically test the responsiveness of labor demand to changes in the wage rate? b) Do we know the expected sign of this measure...

Hi.I need answer for this quistion.Br/Ha

a) What measure can we use to empirically test the responsiveness of labor demand to changes in the wage rate?

b) Do we know the expected sign of this measure from theory? Why?

c) Is labor demand more responsive to changes in the wage rate in the short or in the long run? Why?

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Answer #1

a) The measure that can be used here is the elasticity of labour demand and this measures the responsiveness

b) The expected sign is positive because if the wages increase, demand increases and similarly vice versa

c) In the long run it is indeed not a difficult task for the firms to get to shift in the factors of production and this means that the responsiveness to wage rate will be high in the long run that that of in the short run.

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