2. Effect of substitutes on the demand for labor One factor that affects the ela

Question

2. Effect of substitutes on the demand for labor One factor that affects the elasticity of demand for labor is its share of total production costs The smaller labor's share of production costs, the the elasticity of demand for labor. The year is 2038. In many occupations, robots are replacing humans. As it turns out, robots make very good engineers but very poor babysitters. Assuming the other determinants of demand for the two services are roughly similar, you would expect the demand for human babysitters to be the demand for human engineers.

Explanation / Answer

One factor that affects the elasticity of demand for labor is its share of total production costs. The smaller labor's share of production costs , the greater the elasticity of demand for labor. Because when smaller the wage rate as share of production costs, then firms would prefer to hire more labor. Therefore, demand for labor increases.

The year is 2038. In many occupations, robots are replacing humans .As it turns out, robots make very good engineers but very poor babysitters. Assuming the other determinants of demand for the two services are roughlly similar, you would expect the demand for human babysitters to be less elastic than the demand for human engineers.Because robots make very poor babysitters and because of this when price of babysitters changes then there will less impact on the quantity of babysitters.

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