Chapter 16: The demand for labour

Question 1

Define derived demand

Answer 1

Where the demand for a factor of production or good derives not from the factor or good itself, but from the goods or services that it provides

Question 2

Define marginal revenue product for labor

Answer 2

The additional revenue received by a firm as it increases output by using an additional unit of labour input ie the marginal physical product of labour multiplied by the marginal revenue received by the firm

Question 3

Define marginal revenue product theory

Answer 3

Argues that the demand for labour depends upon balancing the revenue a firm gains from employing an additional unit of labour against the marginal cost of that unit of labour

Question 4

Define labour productivity

Answer 4

A measure of output per hour worked

Question 5

Define unit labour cost

Answer 5

The average cost of labour per unit of output