In which situation is it likely that the demand for labour would be inelastic?
ECONOMICS
JAMB 2015
In which situation is it likely that the demand for labour would be inelastic?
- A. Labour and capital are close substitutes
- B. Labour costs are only a small proportion of total costs
- C. Demand for the final product that the labour produces is elastic
- D. A large quantity of unemployed labour is available in the economy
Correct Answer: B. Labour costs are only a small proportion of total costs
Explanation
When specialised labour or capital is needed, then the demand for labour will be more inelastic with respect to the wage rate.
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