LABOUR MARKET - LABOUR DEMAND CURVE - FIRM AND INDUSTRY

Question 1

Why is the demand curve for an industry downward sloping

Answer 1

because of MRP(which is influenced by LODR) as D curve in industry is total MRP of all workers in industry

Question 2

in an individual firm what is the demand curve made up of

Answer 2

MRP of all workers in that firm

Question 3

what do both the industry demand curve and firm demand curve show

(Relationship)

Answer 3

inverse relationship between wage rate and quantity of workers

because in the SR LODR explaining the simple downward sloping nature

Question 4

in the LR all FOP are variable thereofre capital can

Answer 4

be employed by the firm

Question 5

capital is a substitute for

Answer 5

labour

Question 6

in the LR what will firms think about about labour

Answer 6

not so cost effective

Question 7

in the LR firms think labour is not so cost effective but what maybe more cost effective

Answer 7

to employ cheaper capital relative to labour

Question 8

as in the LR firms think labour isnt cost effective and so employ cheaper capital relative to labour what happens to quantity of worekrs

Answer 8

decrease at higher the higher wage rates

Question 9

what happens at lower wage rates to teh workers

Answer 9

become more competitive and cost effective than capital

Question 10

as at lower wage rates labor becomes more cmopetitive and cost effective than capital what happens to teh Q of workers at a lower wage ratw

Answer 10

means greater Q of workers likely to be employed by firms at a lower wage rate

Question 11

what is het onverse relationship of demand curve in LR for firm and insutry due to

Answer 11

substituability between labour and capital

Question 12

even tough the inverse relationship of D curve in LR for firm and industry due to substitutability between labour and capita l both are downward slpoing due to the

Answer 12

MRP

Question 13

Where do wages come from assuming we operating in perf competition and therfore dont have any wage setting power

Answer 13

industry graph

Question 14

draw the industry and labour demand curve

Answer 14

rate out of

axis labels
drawing of curves
labellingof curves
outlined wage rate of W1 and Q1

Question 15

BASIC ECONOMICS when wages go up or down what happens

Answer 15

we move along labour demand curve (industry?)

Question 16

when we go up in wages there is a what in demand

Answer 16

contrction in labour demand

Question 17

when wages go down what happens

Answer 17

extenstion in labour demand

Question 18

when wages go down what do we see on graph

Answer 18

increase in workes from q1 - q3

w1- w3 goes down

Question 19

when wages go up what do we see on the graph

Answer 19

fall in Q workers from q1 - q2

w1 - w2 increases

Question 20

when we draw and move along industry demand curve what do we assume

Answer 20

ceteris paribus - all other factros affecting labour demand remain constant

Question 21

explain why it makes sense at higher wages for there to be a reduction and therfore a contraction in demand and fall in q of workers

Answer 21

@ higher wages -

to justify firm employing workers

these workers need to have high MRP

so employing at a higher wage rate excludes a lto of worker

so this is why we see contraction in demand and less workers being hired

Question 22

exlpain why at lowe wge rates there is a increase and therfore an extension in demand for workers and an increase in the Q of workers

Answer 22

At lower wage rates easier for workers to be employed

as workers with lower MRPs suddenly can be employed so increase in Q of workers

as firms more willing and able to employ workers at the lower wage rate with a lower MRP needed to justify employment