Contemporary Labor Economics 9th Edition by Campbell Mcconnell, Stanley Brue, David Macpherson, Robert Powell, David Colander

Exercise 22

By referring to Figure 5.11(a), explain the impact of the increase of the price of labor on the cost-minimizing quantity of capital. What can you conclude about the relative strengths of the substitution and output effects as they relate to the demand for capital in this specific situation
6. Is labor demand (a) elastic, (b) unit elastic, or (c) inelastic over the $4 to $12 wage rate range of D L in Figure 5.11(b) Explain by referring to the total wage bill rules (Figure 5.7) and the midpoint formula for elasticity [Equation (5.4)].