econ number 5

econ number 5 - Heather Mayzell Prof. Rosario Basay HOD...

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Heather Mayzell Prof. Rosario Basay HOD 2260.01 November 28, 2007 HOD 2260. Homework Assignment No.5 1. (15) Before the airline industry was deregulated, the Airline Pilots Association (ALPA) was generally regarded as one of the most successful unions raising the wages of its members; the International Ladies Garment Workers Union (ILGWU), on the other hand, has had only limited success in raising wages. Use your knowledge about the factors affecting the elasticity of demand to explain this difference (be specific). The factors affecting the elasticity of demand for labor can be used to explain this difference. The more responsive the firm’s demand for labor is to changes in the wage rate, the more elastic that firm’s demand will be. To be successful, the ALPA would not have had a huge reduction in labor or output because of a change. It dealt with a less specific employment market than that of the ILGWU. Thus, the demand was less elastic. There was a greater possibility for substitution with the ILGWU, making for limited success in raising wages. The workers involved with the ILGWU are not as skilled as pilots, and labor is easier to be substituted with capital in the garment market. Because of this, an increase in wage will represent a decrease in labor because they were easily substituted. This shows that the ALPA was more elastic than the ILGWU, which is the lesser elastic of the two. In addition, unions tend to be more successful when operated in sectors with low elasticity of labor demand. In this situation, ALPA was described to
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econ number 5 - Heather Mayzell Prof. Rosario Basay HOD...

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