3.5 - Factors Affecting Labour Demand Flashcards
What is the key influence on a firms labour demand?
Demand + expected demand for output
Subsequent revenue + profit motives
How does productivity affect labour demand?
Higher output, more attractive
More units of labour employed
How does the wage rate affect labour demand?
Generally causes demand to contract
Depends on productivity + opp. cost
Why do the impacts of a rising WR depend on productivity?
Rise in WR above rise in productivity will cause unit labour costs to rise
Prod > WR => Unit costs stay low
How do complementary labour costs affect labour demand?
More incurred costs => Contraction
E.g., National Insurance Contributions
How do prices of factors of production affect labour demand?
Depends on quality + substitution effect
Falling capital prices cause relative labour cost to rise
Which factors tend to affect a firms labour demand?
Consumer demand
Productivity
Wage Rate + relative wage costs
External labour costs
Capital costs
Govt. intervention
How can govt. intervention affect labour demand?
Employment subsidy/tax incentives to cut costs + improve employment
