Question

g . Suppose that, as a result of a decrease in the market supply of labor, the wage rate has risen 10%. After adjusting its employment level, a firm finds its total wage bill has decreased. What does this occurrence indicate about the firm’s labor demand? Explain

Answer 1

the firm's demand for labour is elastic. the total wage bill decreased even though wage rates have increased. this indicates that the firm's demand for labour is sensitive to wages. As a result of the rise in wages, the demand for labour by the firm fell more than the rise in price. This indicates that demand is elastic

Step-by-step explanation: