Case 2.5 Reducing child labour: Which
policy works best?
Summary
This case study uses the example of comparing the efficacy of alternative (supply-side
and demand-side) policies to illustrate that the price elasticity of demand and supply is an
important determinant of the magnitude of changes to equilibrium price and quantity
when demand and/or supply change.
Suggested answers
1 What results do you find on the relative efficacy of demand-side and supply-side
policies if labour demand is relatively wage inelastic and labour supply if relatively
wage elastic?
Making the opposite assumptions on wage elasticities of labour demand and supply
reverses the conclusion on the relative efficacy of demand-side and supply-side policies.
Now it is policies that cause a reduction in demand for child labour that will cause a
larger reduction in usage of child labour than policies to reduce supply of child labour.
Reducing demand for labour causes excess supply, due to which the wage for child
