23 Demand for labour

Question 1

Demand for labour

Answer 1

Derived demand because the demand for labour is derived from the ability of that labour to produce

Question 2

Factors affecting demand for labour (wage)

Answer 2

Affects the quantity demanded causing extension or contraction

Question 3

Factors affecting demand for labour (demand for the product)

Answer 3

If consumers demand less than the firm demands less labour to produce product

Question 4

Factors affecting demand for labour (labour productivity)

Answer 4

Amount of product that a single worker can produce. If labour becomes more productive more of that labour may be demanded because cost of production will decrease

Question 5

Factors affecting demand for labour (capital productivity)

Answer 5

Firm can choose labour or capital in production
- if capital becomes cheaper or more productive the may lead to decrease in demand for labour as capital is demanded more

Question 6

Factors affecting demand for labour (price of product)

Answer 6

At a lower price firms will supply less of a product and therefore demand less of the labour to produce that product

Question 7

Factors effecting wage elasticity (proportion of labour costs)

Answer 7

Th larger the proportion of labour costs, the more elastic the quantity demanded of labour is to a change in wage

Question 8

Factors effecting wage elasticity (price elasticity of product)

Answer 8

Demand for labour is directly linked to demand for labour to produce the product therefore PED will have an effect on wages elasticity of demand for the labour

Question 9

Factors effecting wage elasticity (whether capital and labour can be substituted)

Answer 9

A relatively small change in wage may lead to a large change is quantity of labour demanded as capital can be substituted for labour

Question 10

Factors effecting wage elasticity (time)

Answer 10

Substitute labour for capital in long run but less likely in the short run which is why forms are willing to pay more or overtime is short term

Question 11

Productivity

Answer 11

Amount produced in relation to 1 unit i.e. 1 unit of labour

Question 12

Marginal revenue product theory

Answer 12

• amount of revenue created by one additional unit of labour
• when firms employs labour it is reasonable to assume that it will hire most productive labour first
• each additional. Unit is likely to be less productive
• firm will continue to employ labour until MC=Marginal revenue gained

Question 13

Factors effecting wage elasticity

Answer 13

• proportion of labour costs
• PED of final product
• whether capital or labour an be substituted
• time

Question 14

Factors effecting demand for labour

Answer 14

• wage
• Demand for product
• labour productivity
• capital productivity
• price of the product