# If the absolute elasticity of labor demand is 2.0, then an eight percent increase in the wage...

## Question:

If the absolute elasticity of labor demand is {eq}\displaystyle 2.0 {/eq}, then an eight percent increase in the wage will decrease employment by how many percentage?

## Elasticity Coefficient:

In the parlance of economics, the concept of elasticity is used to denote the sensitivity of one variable such as quantity demanded, quantity supplied, or labor demand to variables such as a change in price or change in wages. On the basis of the magnitude of elasticity, one may categorize the demand or supply as elastic, inelastic, or unitary elastic.

## Answer and Explanation: 1

The calculated value of the decrease in employment percentage is **16%**.

The percentage decrease in employment is given by:

{eq}\begin{align*} &= \text{Percentage increase in the wage * elasticity of labor demand} \\[0.3 cm] &= 8\% * 2 \\[0.3 cm] &= 16\% \end{align*} {/eq}

#### Learn more about this topic:

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Chapter 4 / Lesson 8Learn the definition of elasticity in economics. Understand the elasticity formula, the ways used to measure elasticity, and who created the theory of elasticity.