Elasticity of labour demand measures the reponsiveness of demand when there is a change in the wage rate.
What does the elasticity of labour demand depend on (1)?
Labour costs as a percentage of total costs: When labour expenses are a high percentage of total costs, then labour demand is more elastic.
Ease and cost of factor substitution: Labour demand is more elastic when a firm can substitute easily between labour and capital inputs.
What does the elasticity of labour demand depend on (2)?
Price elasticity of demand for the final output: This determines whether a firm can pass on higher labour costs to consumers in a form of increased prices.
Time period: In the long run it is easier for firms to switch factor inputs e.g. Bring more capital in perhaps replacing labour.
