explain the possible impact of the higher wages on the output level, total cost of production and input-factor mix of this business in both the short and long-run and how would your answer change if Karishma had estimated that the long-run wage elasticity of labour demand was -0.4?
Assume that tighter immigration laws cause a reduction in the supply of agricultural
workers and this leads to higher wages in the sector. Dean’s Fruity Produce Ltd, a
farm in Leicestershire, uses two inputs to harvest its output – machines (capital) and
agricultural workers. Dean, the managing director of the company, has employed
Karishma (a brilliant statistician) and she has estimated that the business’s long-run
wage elasticity of labour
the short and long-run and how would your answer change if Karishma had estimated that the long-run wage
elasticity of labour demand was -0.4? (1000 words)
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