Shortage of Skilled Workers Impacts Supply Elasticity

Steps:

• A shortage of skilled workers reduces the availability of labor, constraining production capacity.
• Elasticity concepts measure responsiveness to price or other changes in markets.
• This constraint directly limits how much suppliers can increase output when prices rise.
• Thus, it affects the price elasticity of supply, not demand-side measures.

Why D is correct:

• Price elasticity of supply is the percentage change in quantity supplied divided by percentage change in price; a labor shortage makes supply less responsive, lowering this elasticity.

Why the others are wrong:

• A: Cross elasticity of demand measures responsiveness of demand for one good to price changes in another, unrelated to labor supply constraints.
• B: Income elasticity of demand measures how demand changes with consumer income, unaffected by worker shortages.
• C: Price elasticity of demand measures consumer responsiveness to price changes, which remains unchanged by supply-side labor issues.

Final answer: D