Supply Analysis: Elasticity and Wage Adjustments

This lecture focuses on the analysis of supply elasticity in the context of a temporary employment agency providing student labor to agriculture. The instructor presents data on hourly wages and the corresponding hours of labor supplied over a year. The relationship between wage rates and labor supply is examined, emphasizing that the supply of hours is primarily influenced by the wage rate. The instructor explains how to calculate the elasticity of supply using a derived supply function, which is represented graphically. The lecture includes practical exercises, such as determining the necessary wage increase to attract a 5% increase in student hours. The instructor discusses the implications of elasticity values, illustrating how different wage levels affect the required percentage change in wages to achieve desired changes in labor supply. The session concludes with a broader application of elasticity concepts to various economic scenarios, reinforcing the importance of understanding supply dynamics in labor markets.