Demand For Labour Flashcards
What is the demand for labour?
The demand for labour shows how many workers will be hired at a given wage rate over a particular time period.
What is the relationship between wage rates and demand?
There is an inverse relationship between wage rates and demand for labour.
As wage rates increase, firms will employ less workers.
What way does demand for labour slope on the graph?
Demand for labour is downwards sloping due to its inverse relationship with wage rates
What is long run demand for labour?
All factors of production are variable
Firms can choose which production combination to use
If labour is cheaper than alternative methods, the demand for labour will rise
What is short run labour?
At least one factor of production is fixed (not variable)
The more workers employed, the less productive they will be and the wage rate would have to fall to encourage demand for more workers.
Define total physical product
The output from a given quantity of factors of production
Define marginal physical product
The additional output produced by the addition of an extra unit of a variable factor of production
Define marginal revenue product (MRP)
The value of the physical addition to output of an extra unit of a variable factor of production.
How would a rise in consumer demand affect the demand for labour?
A rise in consumer demand would lead to an increase in demand for labour
This is because firms will want to produce more in order to meet demand
How would improvements in technology affect the demand for labour?
Improvements in technology would result in a decrease in demand for labour.
This is because firms will most likely choose to invest in capital rather than employing more workers
What is the elasticity of demand for labour?
The elasticity of demand for labour is the ‘responsiveness of quantity demanded of labour to a change in the wage rate’
What does elasticity of demand depend on?
Labour costs as a % of total costs
Ease and cost of factor substitution (choosing to invest in capital instead)
Whether or not a firm can pass on higher labour costs through increased prices of goods
What is the labour supply?
Labour supply is the number of hours people are willing and able to supply at a given wage rate
How we measure the quantity of labour supplied?
We measure the quantity of labour supplied by the number of hours worked in a given time period
How do we measure the price of labour?
We measure the price of labour by the wage rate
