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Factors That Influence The Elasticity Of Demand

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3. FACTORS THAT INFLUENCE THE ELASTICITY OF DEMAND FOR LABOUR
For one to understand, we use the terms elastic and inelastic. According to Mohr, Fourie, and associates (2008:160-162), Inelastic demand refers to when the quantity demanded changes according to a change in price. The percentage change in the quantity is less than the percentage change in the price for the product. Therefore, the price elasticity of demand, or the elasticity coefficient, is greater than zero, but smaller than one. For Elastic demand, it will be the opposite. Demand is elastic when a price change leads to a greater change in the quantity demanded.
Kaufman and Hotchkiss (2006:232) state that in labour economics, the elasticity of labour demand is one of the most …show more content…

(1998:360), the more rapidly the marginal product diminishes, the less elastic is the demand for labour, other things remaining the same. In some instances marginal product diminishes quickly, for example, the marginal product of one bus driver is high as he is highly valued to drive the bus but the marginal value of a second bus driver on the same bus is close to zero as a second bus driver on that bus is not needed. In other instances marginal product diminishes slowly, hiring another window cleaner to a team almost doubles the amount of glass that can be cleaned in an hour, the marginal product of the second window cleaner is almost as same as the first.
3.6 The Cross-Wage Elasticity of Demand
Ehrenberg and Smith (1985:95) indicate that as businesses may employ several categories of labour and capital, the demand for any one category can be affected by price changes in the others. For example, if the wages of carpenters rose, more people might build brick homes and that might cause an increase for those businesses. On the other hand, an increase in carpenter’s wages might decrease the overall building of homes in the economy. This would cause a decrease for the demand of plumbers. Changes in the price for capital could increase or decrease the demand for workers.
4. WAGE DETERMINATION IN BOTH PERFECT AND IMPERFECT

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