3.5.1 Demand for labour

Question 1

Factors influencing demand for labour: The price of the good or service

Answer 1

The higher the price of the good or service, the more profitable it is for firms to produce it, and the more labour they will demand.

Question 2

Factors influencing demand for labour: Labour costs

Answer 2

The higher the cost of labour, the less profitable it is for firms to hire workers, and the less labour they will demand.

Question 3

Factors influencing demand for labour: Productivity of labour

Answer 3

The more productive workers are, the more output they can produce per hour, and the more labour firms will demand.

Question 4

Factors influencing demand for labour: The cost and availability of substitutes

Answer 4

If there are good substitutes for labour, such as capital or automation, firms will be less likely to demand labour.

Question 5

Demand for labour as a derived demand

Answer 5

The demand for labour is derived demand as it is derived from demand for the product the labour produces.

Question 6

Elasticity of demand for labour

Answer 6

Elasticity of labour demand measures the responsiveness of demand for labour after a change in the wage rate.