Complete question:
If a labor union tries to reduce the availability of substitutes for the product it sells, it is attempting to affect the __________ for labor. But if it tries to increase substitute factor prices, it is attempting to affect the __________ labor.
a. elasticity of demand; supply of
b. demand; elasticity of demand for
c. elasticity of demand; demand for
d. demand; supply of
e. none of the above
Answer:
If a labor union tries to reduce the availability of substitutes for the product it sells, it is attempting to affect the elasticity of demand for labor. But if it tries to increase substitute factor prices, it is attempting to affect the demand for labor.
Step-by-step explanation:
The elasticity of demand is indeed an economic theory that tests the degree to which the customer reacts to the increase in quantity offered as a consequence of the shift in quality, as long as all other conditions are equivalent.
Labour demand would be more efficient if the company can rapidly and efficiently substitute labor inputs with capital inputs. If skilled labor or capital is required, the market for labor may be more inelastic with regard to the cost of wages.