The determinants of the elasticity of demand for labour
Elasticity of demand for labour measures how much the quantity of workers demanded changes when the wage rate changes. Several factors determine whether that response is large or small.
Formula
PED of Labour = % Change in Quantity of Labour Demanded ÷ % Change in Wage Rate
Real World
In the short run, airlines cannot easily replace pilots with automation, so a 10% rise in pilot wages causes very little reduction in pilot employment — demand for pilots is wage-inelastic.
Exam Focus
Use Marshall's four rules as a ready-made framework — naming them explicitly signals evaluative depth to examiners.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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