Question1 Suppose the price of capital in the restaurant ind

Question1. Suppose the price of capital in the restaurant industry decreases. Explain how the decrease in the price of capital affects the demand for labor in the restaurant industry. Question 2 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

ans 1

Due to decrease in price of capital, restauarant industry will employ more capital as capital is avialable at lower price , that means industry will start replacing labor by capital, less labor will be used because capital is now comparatively cheper than labor. so less labor will be demanded by the restaurant industry.

ans 2. TRUE

the supply of a particular type of labor to a firm is less elastic because that particular type of labor is skilled according to the requirements of that firm therefore they will not be quickly employed by other industry if particlar type of labor move out of firm due to fall in wages. therefore elaticity of supply of a particular type of labor to a firm is less elastic in comparison to elasticity of supply of labor to the market. in case of whole market , elasticity will increase due to increased mobility