Microeconomics (labour market, the union) question?

[dannysaf]

Suppose that a union's goal is to maximize the total wage income received by union workers, namely, the average union wage times the number of union workers employed. To achieve this goal, the union should:

A. Decrease the union wage rate if labor demand is inelastic and increase the wage rate if labor demand is elastic
B. Always decrease the union wage rate
C. Increase the union wage rate if labor demand is inelastic and decrease the wage rate if labor demand is elastic
D. Always increase the union wage rate

I guess, it's C, but really not sure!

 

[mgb_phys]

Are you clear what elastic/inelastic labor demand means?

 

[dannysaf]

Are you clear what elastic/inelastic labor demand means?

Of couse, but I'm not sure what they mean by total wage income !

 

[mgb_phys]

C. Increase the union wage rate if labor demand is inelastic and decrease the wage rate if labor demand is elastic

total wage is just pay * number of workers

demand is inelastic - means the number of jobs is fixed whatever the pay.
demand is elastic - means there are more jobs created if the wages were less

 

[dannysaf]

total wage is just pay * number of workers

demand is inelastic - means the number of jobs is fixed whatever the pay.
demand is elastic - means there are more jobs created if the wages were less

If demand is absolutly inelastic then the number of jobs is fixed whatever the pay. But here is just inelastic demand, so the number of jobs will vary, but on very small quantity!