3.5.1 - Demand For Labour Flashcards
What Is The Labour Market Composed Of?
(2 Points)
~ Sellers of labour (Households).
~ Buyers Of Labour (Firms).
What Type Of Demand Is The Demand For Labour?
Derived demand.
What Does Derived Demand Mean?
(2 Points)
~ 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.
What Are The Factors That Influence The Demand For Labour?
(4 Points)
~ 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.
What Could Be Some Points Made For ‘The Price Of The Product Being Produced’?
(2 Points)
~ 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.
What Could Be Some Points Made For ‘The Demand For The Final Product’?
(2 Points)
~ 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.
What Could Be Some Points Made For ‘The Ability To Substitute Capital For Labour’?
If using machinery is more cost effective than using labour, then the demand for labour will fall.
What Could Be Some Points Made For ‘The Productivity Of Labour’?
If productivity for labour increases this will lower average costs and firms will likely demand more labour.
What Type Of Relationship Is There Between Wage & Quantity Of Workers?
Inverse.
What Does The Demand For Labour Show?
How many workers a firm is willing to hire at a given wage rate in a given time period.
What Is MRP?
(3 Points)
~ Marginal revenue product.
~ Is the additional revenue gained from the additional output that workers produce.
~ MRP = MPP x MR
How Do Firms Determine Their Decisions For Labour?
MRP.
