Demand for Labour

Question 1

What kind of demand is labour

Answer 1

Derived demand as a rise demand for labour comes from a rise in demand in a certain industry

Question 2

MRPL

Answer 2

Marginal Revenue Product of Labour

Question 3

Explain MRPL

Answer 3

Extra revenue gained by the firm from employing one more worker, firms will only higher one more worker they add more to revenue than they do to cost

Question 4

MCL

Answer 4

Marginal cost of labour, the cost of hiring one more worker or the wage in a perfectly competitive labour market

Question 5

What does it mean if MRPL is equal to MCL

Answer 5

This is the optimum number of workers to employ to maximise profits

Question 6

What does it mean if MRPL is above MCL

Answer 6

A firm could employ more workers and increase profits

Question 7

What doe sit mean if MRPL is below MCL

Answer 7

Firm is costing itself by employing too many workers

Question 8

How to calculate MRPL

Answer 8

MPPL X MR

Question 9

what is MPPL

Answer 9

output/physcial product produced by an additional worker

Question 10

What shape is MRP curve

Answer 10

like ppf

Question 11

What is the MRP curve the same as

Answer 11

Demand curve

Question 12

Factors affecting demand of labour

Answer 12

• Wage rate
• Demand for the product or service
• Productivity of labour
• Substitutes for labour
• Profitability of firms
• Number of firms in the market
• Government regulation

Question 13

How does wage rate affect demand of labour

Answer 13

Inverse relationship between wage rate and quantity of workers, demand for labour will fall when wage rates begin to rise

Question 14

How does productivity affect demand of labour

Answer 14

Higher levels of productivity the higher the demand for the worker, productivity can be increased with training and education.

Question 15

unit labour costs

Answer 15

Labour cost per unit of output, so higher the unit labour cost the lower the productivity

Question 16

Why will wage rate increase not always cause a decrease in demand

Answer 16

If the worker had an equivalent productivity increase then demand wouldn’t change as the unit labour cost would remain thesame

Question 17

How does product demand affect demand of labour

Answer 17

Demand for labour is derived from the product it is needed to produce so a rise in demand for wheat product causes a risen demand of labour

Question 18

How does substitutes for labour affect demand of labour

Answer 18

If labour can be replaced by cheaper capital like machinery then demand for labour will fall

Question 19

How does profitability of the firm affect demand of labour

Answer 19

The more profitable the firm the more labour they can afford to employ so demand increases

Question 20

How does the number of firms in the market affect demand of labour

Answer 20

The more firms in the industry the higher the demand for labour as more labour is needed, monopsony.

Question 21

How does government regulation affect demand of labour

Answer 21

More regulations on a firm the more costly it is to operate so they will demand less labour

Question 22

What does it mean when demand for labour is elastic

Answer 22

Small wage changes cause large changes in the quantity of labour demanded

Question 23

What does it mean when demand for labour is inelastic

Answer 23

Large wage changes cause small changes to the quantity of labour demanded

Question 24

What makes demand for labour more elastic

Answer 24

• If labour can be substituted easily for capital
• The more elastic the good that is being produced
• If wages are a larger proportion of a firms costs

Question 25

What makes demand for labour more inelastic

Answer 25

• If the job has low occupational mobility, high skill with many qualifications
• If the good is inelastic
• If wages take up a smaller proportion of total costs

Question 26

What is demand for labour in the short and long run

Answer 26

In the short run it is more inelastic as changes are more difficult to make, but in the long run firms can plan ahead to replace labour making it more elastic

Question 27

Example of a monopsonist labour market

Answer 27

London Underground