Question

Using the midpoint method, the elasticity of Caroline's labor supply between the wages of $25 and $40 per hour is approximately (0.08,0.54,1.86,17.5) , which means that Caroline's supply of labor over this wage range is (elastic,inelastic) .

Answer 1

The elasticity of labor supply is calculated by dividing the percentage change in labor hours by the percentage change in wages. Elasticity greater than 1 indicates an elastic labor supply, and less than 1 indicates an inelastic labor supply.

Step-by-step explanation:

The question is asking to calculate the elasticity of labor supply using the midpoint method for Caroline's wage increase from $25 to $40. To determine the elasticity, we divide the percentage change in the quantity of Caroline's labor supply by the percentage change in wages.

The concept of wage elasticity of labor supply is important in understanding how changes in wages affect the quantity of labor supplied. When the elasticity value is greater than 1, the labor supply is considered elastic. When it's less than 1, the labor supply is inelastic. Teenage workers often exhibit high elasticity, meaning their labor supply responds substantially to wage changes. Adult workers, however, generally have an inelastic labor supply, with less significant changes in labor supply in response to changing wages.