Question

Charles is a stay-at-home parent who lives in New York City and teaches tennis lessons for extra cash. At a wage of $25 per hour, he is willing to teach 6 hours per week. At $35 per hour, he is willing to teach 16 hours per week. Using the midpoint method, the elasticity of Teresa’s labor supply between the wages of $25 and $35 per hour is approximately _________ , which means that Teresa’s supply of labor over this wage range is _________

Answer 1

2.75, elastic.

Step-by-step explanation:

Measure labor supply elasticity of Individual T's as follows :

`\bf Elasticity=(Percent \;change\;in\;labour\;hr)/((Average\;labour\;hour)/((Percent\;change\;in\;wage\;price)/(Average\;wage\;price) ) )`

`\bf =(16-6)/((16+6)/((2)/((35-25)/((35+25)/(2) ) ) ) )`

`\bf=(10)/((11)/((10)/(30) ) )`

`\bf=(0.91)/(0.33)`

`=2.75`

Therefore, the elasticity of the labour supply of Individual T's is approx. of earnings per hour. 2.75, meaning that the work supply of Person T's is elastic across this wage range