Reference no: EM133125294

Suppose the wage for textile manufacturing workers rises from $9 to $11 per hour, and employment of textile manufacturing workers falls from 680 to 500 hours per week.

The own-wage elasticity of demand for airline pilots is 0.4.

If the difference in elasticity between these two occupations is explained by labor's share of total costs, which of the following describes the resulting changes in demand for each category of labor?

A. A larger scale effect in the demand for textile manufacturing labor than for airline pilots.

B. A larger scale effect in the demand for airline pilots than for textile manufacturing labor.

C. A larger substitution effect in the demand for textile manufacturing labor than for airline pilots.

D. A larger substitution effect in the demand for airline pilots than for textile manufacturing labor.

Which of the following offers a potential explanation for the difference in own-wage elasticity for these two occupations?

A. Capital is not easily substituted for either textile manufacturing labor or airline pilots.

B. Capital is easily substituted for both textile manufacturing labor and airline pilots.

C. Capital is more easily substituted for textile manufacturing labor than for airline pilots.

D. Capital is more easily substituted for airline pilots than for textile manufacturing labor.

If the difference in elasticity between these two occupations is explained by the substitutability of each labor input, which of the following describes the resulting changes in demand for each category of labor?

A. A larger scale effect in the demand for airline pilots than for textile manufacturing labor.

B. A larger substitution effect in the demand for airline pilots than for textile manufacturing labor.

C. A larger scale effect in the demand for textile manufacturing labor than for airline pilots.

D. A larger substitution effect in the demand for textile manufacturing labor than for airline pilots.