Question

How does the factor of elasticity affect unemployment rates for the major, EDUCATION?

Answer 1

Education acts as a signal of knowledge and skills. Higher the level of education, higher the chances of getting employed.

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Assume that there are two categories of people, A and B.

Category A includes low income group people who neither can afford education nor give it much importance in life. This implies that they have elastic demand for education.

Category B includes high income peope who not only can afford education but also give it high importance. No matter what they like to complete their education. This implies that they have inelastic demand for education.

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People having elastic demand for education have lower chances of getting employed due to lack of skills and knowledge. Thus, elastic demand for education implies higher unemployment.

However people having inelastic demand for education have higher chances of getting employed due to their expertise. Thus, inelastic demand for education implies lower unemployment.