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problem 5 crossprice elasticity consider teenage labor and adult labor...

Question: problem 5 crossprice elasticity consider teenage labor and adult labor...

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Problem #5: Cross-price elasticity Consider teenage labor and adult labor as separate inputs in production for fast-food restau- rants. Suppose the wage of teenage workers increases (but the adult wage remains the same). Analyze the effect of the teenage wage increase on fast-food restaurants employment of adult labor, given that: 1. Teenage labor costs are a large share of total costs at fast-food restaurants. 2.Adults dislike the tasks teenagers do at fast-food restaurants (i.e. cleaning bathrooms), so it takes big increases in their wages to get them to do this kind of work. Given these 2 facts, are teenage workers and adult workers more likely to be gross substitutes or gross complements in fast-food production, holding all other factors constant? Explain your answer

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