Demand for labour
A labour market is an example of a factor market (ie. FOP market).
Firms are the source of demand for workers in the labour market and individuals/households
are the supply of workers in the workforce.
The demand for labour is derived from the
demand for the product.
〰 Derived Demand- the demand for
a good or FOP, not wanted for its
own sake, is a consequence of
demand for something else
- Marginal Productivity Theory of the demand for labour (MRP)
〰
In the short run, some FOP are
fixed/constrained. Marginal Revenue (MR)- the addition to TR
In a perfectly competitive from selling one xtra unit of output.
market, the firm is a price
〰
taker where MR=AR. The
firm is also a wage taker, Marginal Revenue of Labour (MRP)- the
therefore the MCL is a revenue gained by the firm from selling the
horizontal line at the market extra output made after employing one
WR. additional worker; measures how productive
an extra worker is to a firm.
This means that firms base their
labour demand on MRP.
Firms will employ up until when
MRP=WR as this is the highest 〰 Marginal Product of Labour = Marginal
Physical Product (MPP) - the addition to total
level of productivity while profit
output produced by one worker.
maximising.
MRP = MPP xMR(price)
Example calculation table, graph and explanation
Demand for labour 1
A labour market is an example of a factor market (ie. FOP market).
Firms are the source of demand for workers in the labour market and individuals/households
are the supply of workers in the workforce.
The demand for labour is derived from the
demand for the product.
〰 Derived Demand- the demand for
a good or FOP, not wanted for its
own sake, is a consequence of
demand for something else
- Marginal Productivity Theory of the demand for labour (MRP)
〰
In the short run, some FOP are
fixed/constrained. Marginal Revenue (MR)- the addition to TR
In a perfectly competitive from selling one xtra unit of output.
market, the firm is a price
〰
taker where MR=AR. The
firm is also a wage taker, Marginal Revenue of Labour (MRP)- the
therefore the MCL is a revenue gained by the firm from selling the
horizontal line at the market extra output made after employing one
WR. additional worker; measures how productive
an extra worker is to a firm.
This means that firms base their
labour demand on MRP.
Firms will employ up until when
MRP=WR as this is the highest 〰 Marginal Product of Labour = Marginal
Physical Product (MPP) - the addition to total
level of productivity while profit
output produced by one worker.
maximising.
MRP = MPP xMR(price)
Example calculation table, graph and explanation
Demand for labour 1
