Demand for labour pt2

Question 1

Limitations of the MRPL concept

Answer 1

-Measuring labour efficiency/productivity can be hard depending on the sector
-Collaborative work makes it difficult to establish the productivity of individual workers
-Many people set their own pay such as self employed workers

Question 2

What influences the wage elasticity labour of demand?

Answer 2

-Labour costs as a % of total costs
-Ease and cost of factor substitution
-PED for the final product
-Time period

Question 3

Labour costs an a % of total costs

Answer 3

When labour expenses are a high % of total costs, then labour demand is more wage elastic

Question 4

Ease and cost of factor substitution

Answer 4

Labour demand is more elastic when a firm can substitute easily and cheaply between labour and capital

Question 5

PED for the final product

Answer 5

This determines whether a firm can pass on higher labour costs to consumers in higher prices. If demand is inelastic, higher costs can be passed on.

Question 6

Time period

Answer 6

In the LR it is easier for firms to switch factor inputs e.g. bring in more capital, replacing labour.