(5 pts) Clearly explain why the following statement is false: The supply of a particular type...

(5 pts) Clearly explain why the following statement is false: The supply of a particular type of labor to a firm is less elastic than the supply of labor to the market. For example, the supply of PhD economists facing UW-Parkside is less elastic than the supply of PhD economists to academia in general.

Expert Solution

Supply and demand for labour functions are elastic when a given percentage change in the wage brings a larger percentage change in the quantity demanded and supplied of labour. For a typical firm, the labour that the firm employees have closer substitutes. For example, companies that employ operators or technicians from a specific universities so that if the wage rate changes and desired workers are unavailable, then the company can higher workers with similar skills but who have their degrees from other universities. In this way the labour supply is considered to be in narrow and elastic.

Market supply curve in general will hire workers from every part of the nation that have similar skills. Because there is no substitute for these workers, if the number of search workers is reduced then there is no alternative but to increase the wage. This indicates that the percentage change in the wage rate will be relatively higher. Hence the labour supply curve in the market will be inelastic.

Rahul Sunny answered 2 years ago

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