The Governor of Arkansas has asked you (her crack economic advisor) to analyze how employment in trucking and poultry processing will be affected if deregulation lowers labor cost in both industries by ten percent.
A) How would you answer if you knew that the elasticity of labor demand was -.40 in trucking and -1.10 in poultry processing?
B) How would you answer if you did not know the elasticity information above but knew the following:
1) It is easier to substitute machinery for labor in poultry processing than it is in trucking, and
2) The product demand for poultry is less sensitive to price increases than is the product demand in trucking.