3.5.1 - Demand For Labour

Question 1

What Is The Labour Market Composed Of?
(2 Points)

Answer 1

~ Sellers of labour (Households).
~ Buyers Of Labour (Firms).

Question 2

What Type Of Demand Is The Demand For Labour?

Answer 2

Derived demand.

Question 3

What Does Derived Demand Mean?
(2 Points)

Answer 3

~ Demand for labour depends on the demand for goods and services.
~ If the demand for goods and services increase then the demand for labour also increases, vice versa.

Question 4

What Are The Factors That Influence The Demand For Labour?
(4 Points)

Answer 4

~ The price of the product being produced.
~ The demand for the final product.
~ The ability to substitute capital (Machinery) For Labour.
~ The productivity of labour.

Question 5

What Could Be Some Points Made For ‘The Price Of The Product Being Produced’?
(2 Points)

Answer 5

~ Selling price for a product increases, MRP of labour will increase and the firm will demand more labour.
~ Higher priced products incentivise firms to supply more, meaning demand for labour will continually increase.

Question 6

What Could Be Some Points Made For ‘The Demand For The Final Product’?
(2 Points)

Answer 6

~ When an economy is booming demand will be high, meaning the demand for labour will be high.
~ When an economy is in a recession demand will be lower, meaning that the demand for labour will be lower.

Question 7

What Could Be Some Points Made For ‘The Ability To Substitute Capital For Labour’?

Answer 7

If using machinery is more cost effective than using labour, then the demand for labour will fall.

Question 8

What Could Be Some Points Made For ‘The Productivity Of Labour’?

Answer 8

If productivity for labour increases this will lower average costs and firms will likely demand more labour.