demand for labour, supply of labour, market wage determination Flashcards
who demands labour in a labour market and who supplys?
demand firms
supply individuals
when do we have an equilibrium wage rate/ equilibrium quantity of workers?
D(L) = S(L)
what does the demand curve for labour show?
how many workers will a firm employ at a given wage rate over a given time period
what is the demand for labour derived from?
demand for labour is derived from the demand for the product. they employ workers because theres a need for them
what do firms base their demand decisions for labour on?
firms base their demand decisions for labour on the marginal revenue product
whats the equation for MRP?
MRP = MPP(marginal physical product) times MR
why is the MRP curve shaped that way?
law of diminishing returns
what does D(L) = ?
D(L)=MRP
what are market wages in PC?
in perfectly competitive market wages are constant and set by what everyone in the market is
what can the MRP curve tell our firms
MRP curve can tell our firms how to maximise their revenue brought in from its workers
when will the firm stop hiring workers?
firms will hire workers until the MRP is equal to the wage/marginal cost of labour (MRP=MC(wage))
what is an incentive to increase supply of workers?
higher wages are an incentive to work so quantity of workers (supply)
in PC firms are what? price…
in PC firms are wage takers
