Case of inelastic derived demand. Suppose that a particular building-trades union, such as the electricians', raises wages. This case emphasizes the factors making for inelastic demand and a small resulting drop in employment of electricians. (1) Note that in the short run, employers cannot substitute other factors - such as machines or plasterers - for electricians. (2) Do not forget the importance of being unimportant: The total cost of a house will be little affected by a change in the wage rate of electricians alone. This fact will tend to cause only a mild reduction of employment as a result of an increase in their wages. (3) Suppose there is a great housing shortage so that people feel they need homes desperately. Inelasticity of demand for the final product, housing, will lower the derived elasticity for electricians. (4) Suppose that all practicing electricians must be in the union, so that an increase in wages is not followed by a great increase in nonunion labor supplied. This inelasticity of supply of other factors will tend to make the demand for union electricians inelastic. (5) Suppose, finally, that administered pricing or public regulation will not permit the prices at which houses are available to change much. This will make for a little quantity of houses sold and hence inelastic demand for the factors that build house. 1, fiche 1, Anglais, - inelastic%20derived%20demand
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