The supply of a particular type of labor to a firm is less e

The supply of a particular type of labor to a firm is less elastic than the supply of labor to the market. True, false, or uncertain? Explain.

Solution

The supply of a particular type of labor to a firm is less elastic than the supply of labor to the market. It is true, because the demand for labor for a firm is determining the marginal productivity of labor. The marginal productivity is diminishing when more unit of labor is used, So it is less elastic. But the market demand for labor is the amount of labor that all the firms participating in that market will demand at different market wage levels. The market demand curve for a particular type of labor is the horizontal summation of the marginal revenue product of labor curves of every firm in the market for that type of labor. The market supply of labor is the number of workers of a particular type and skill level who are willing to supply their labor to firms at different wage levels. The market supply curve for a particular type of labor is the horizontal summation of the individuals\' labor supply curves. It is more elastic because there will always be some workers in the market who will be willing to supply more labor and take less leisure time, even at relatively high wage levels.