Demand for Labour

Question 1

Demand for Labour

Answer 1

The amount that firms are willing to pay for certain amount of workers.

Question 2

Factors that influence demand for labour

Answer 2

Workers productivity (If productivity is higher for a worker, the firm may be prepared to pay more)

Cost of Capital (factor substitution)

Level of Demand (Consumer Demand)

Labour Costs as a percentage of Total Costs

Question 3

Derived Demand

Answer 3

Labour is dependent on demand for the final good and service that the workers produced. Low demand for the good/service means low demand for labour.

Question 4

Marginal Physical Product

Answer 4

The physical additional to output of an extra unit of a variable factor of production

Question 5

Marginal Revenue Product

Answer 5

The value of the physical addition to output of an extra unit of a variable factor of production

Question 6

Marginal Revenue Product Curve

Answer 6

Demand = MRP

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Question 7

Elasticity of Demand for Labour

Answer 7

The responsiveness of demand of labour as a result of a change in the price of labour (wage rates eg)

Question 8

Determinants of Elasticity of Demand for Labour

Answer 8

Time - The longer the time period, the easier it is to substitute labour for other factors of production or vice versa. The longer the time, the more elastic.

Availability of Substitutes - The easier it is to substitute factors of labour, the greater will be the response by firms to a change in real wage rates. So better substitutes mean more elastic.

Elasticity of Demand for the product - Labour is a derived demand.

The proportion of labour costs to total costs.

Question 9

Total Physical Product

Answer 9

The total output of a given quantity of factors of production.

Question 10

Unit Labour Costs

Answer 10

Costs of employing labour per unit of output or production.