1. Addison Wesley Longman, Inc. © 2000 Chapter 4 Labor Demand Elasticities

2. Addison Wesley Longman, Inc. © 2000 Relative Demand ElasticitiesFigure 4.1

3. Addison Wesley Longman, Inc. © 2000 Different Elasticities along a Demand CurveFigure 4.2

4. Addison Wesley Longman, Inc. © 2000 When is Elasticity High? Output elasticity is high - large scale effect Other inputs easily substituted Supply of other inputs is elastic Cost of labor is large share of total Firm demand is more elastic than industry Long run is more elastic

5. Addison Wesley Longman, Inc. © 2000 Cross Wage Elasticity If elasticity >0, the goods are gross substitutes if elasticity < o, they are gross complements sub effect - bigger if there are more substitutes - bigger if supply of subs is elastic scale effect - bigger if k is a large share of total - bigger if output market is elastic

6. Addison Wesley Longman, Inc. © 2000 Time Profile of the Minimum Wage Relative to Average Hourly Earnings Figure 4.3

7. Addison Wesley Longman, Inc. © 2000 Minimum Wage Effects: Growing Demand Obscures Job LossFigure 4.4