HW6MFRANCISMcKayla FrancisHomework #6ECON 2600Dr. Hyojin JeongPrinciples of MicroeconomicsCh. 13 Questions and Problems #1,7,14 Pg. 3721.It means that it is the result of some other demand.7. As labor productivity increases, so do wage rates. This is due to the fact that an increase inlabor productivity (MPP) causes the demand for labor to rise, by increasing the marginalrevenue product (MRP). MRP = MPP x MR.14. a)If the demand for the product that labor produces is highly elastic, a small percentageincrease in price will decrease quantity demanded of the product significantly, which will,in turn,decrease the quantity of labor demanded significantly. Therefore, the higher the elasticity ofdemand for the product, the higher the elasticity of demand for labor; and, likewise, the lowerthe elasticity of demand for the product, the lower the elasticity of demand for labor.b)The higher the percentage of total cost accounted for by labor, the more elastic thedemand for labor, since an increase in wage rates will raise total cost more under suchcircumstances, increasing price and reducing quantity demanded of the product. The moresubstitutes available for any good or service, the more elastic the demand for that good orservice, since a price increase can be responded to by looking to the substitutes.c)The more substitutes for labor, the more elastic the demand for labor. More numbersof substitutes for labor means that labor can be more easily replaceable, so that the demand forlabor will respond more to wage rate changes.