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Amy is a stay-at-home parent who lives in Dallas and does some consulting work for extra cash. At a wage of $50 per hour, she is willing to work 7 hours per week. At $65 per hour, she is willing to work 10 hours per week.
Using the midpoint method, the elasticity of Amy’s labor supply between the wages of $50 and $65 per hour is approximately _____, which means that Amy’s supply of labor over this wage range is _____.

Respuesta :

Answer:

Elasticity = 1.35(approx)

Explanation:

Given:

wages = $50 per hour

Per day work = 7 hours

New wages = $65 per hour

Per day work = 10 hours

Computation:

Midpoint method:

Elasticity = (Change in labor / Average labor ) / (Change in wages / Average wages)

[tex]Elasticity =\frac{\frac{Change in labor}{Average labor} }{\frac{Change in wages}{Average wages} } \\Elasticity =\frac{\frac{10-7}{(10+7)/2} }{\frac{65-50}{(65+50)/2} } \\Elasticity =\frac{\frac{3}{8.5} }{\frac{15}{57.5} } \\Elasticity =\frac{172.5}{127.5} \\Elasticity = 1.3529[/tex]

Elasticity = 1.35(approx)

Elastic and higher than 1

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