1)The demand for labor is derived from the demand for labor unions.

True

False

2)The demand for labor is derived from the demand for the products produced by labor.

True

False

3)The greater (higher) the wage elasticity of demand, the:

A. greater the proportion of capital costs to labor costs in the production of goods.

B. greater the price elasticity for the product produced by labor.

C. the smaller the number of substitutes for labor.

D. the smaller the time period.

E. the smaller the proportion of labor costs to total costs.

1)The correct option is:

FALSE

The demand for labor is influenced by the policies framed by the labor unions but is not dependent on it. The demand for labor is dependent on the demand for the final product it produces.

2)The correct option is

TRUE

The demand for labor is the classic case of derived demand. The demand for labor is dependent on the market demand for the final good that it produces. If the demand for the final product falls to zero, the demand for labor also falls to zero.

3)The greater (higher) the wage elasticity of demand, the:

B. greater the price elasticity for the product produced by labor.

A, C,D, and E would all be correct if the question asked about a lower or smaller wage elasticity of demand.

Higher price elasticity for the product produced by labor means that it is harder for firms to offset wage increases with price increases.