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Micro Economics > MRP - DEMAND FOR LABOUR > Flashcards

MRP - DEMAND FOR LABOUR Flashcards

1
Q

LABOUR MKT MINDSET

A

Firms demand labour

individuals supply labour

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2
Q

Demand for labour = supply what do we get

A

equilibrium wage rate

equilibrium quantity of workers

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3
Q

what is demand for labour for an individual firm

A
  • shows us how many workers firms will hire at any given wage rate over given period of time
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4
Q

demand for labour is described as a

A

derived demand

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5
Q

demand for labour is a derived demand what does this mena

A

comes from demand for goods and services

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6
Q

when will labour demand be high

A

only when demand for g/s high q

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7
Q

as demand for labour is only high when demand for g/s is high what does htis mean about fimrs hiring indiivudals

A

only hire workers as theres a need for workers to produce g/s

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8
Q

Firms wll base demand decision for labour on

A

Marginal Revenue Product

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9
Q

what is Marginal Revenue Product

A

extra revenue generated when additional worker is hired

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10
Q

MRP formula

A

Marginal Physical Product * Marginal Revenue

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11
Q

Marginal Physica Product means

A

marginal product

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12
Q

data we use when pplotting grpah is for an individul firm in the SR so they are experiencing

A

LODR

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13
Q

As data we use to plot graph comes from an individual firm experiencing LODR what happens to TPP and MPP

A

increase intially then decreases due to the LODR as theres a constraint on fixed factors of production

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14
Q

we also assume fimr is operating in a

A

perfect compeition market

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15
Q

as firm is operating in a perfect competition market they are

A

price takers

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16
Q

price is equal to

A

AR

and

MR

17
Q

as price is equal to MR how else can we calculate MRP

A

price * marginal physical product of each individual worker

18
Q

when plotting MRP curve what is on the y axis

A

wage/output

19
Q

when plotting MRP what is on the x axis

A

quantity of workers

20
Q

MRP =

A

demand for labour

21
Q

why does MRP = d

A

shows at any given wage rate how many workers firms should employ

22
Q

why is teh MRP kinda shaped liek an upside down U

A

LODR

23
Q

Exaplinn why MRP was increasing as we hired 3 workers

A

brought more rev than previous workers so MRP was increasing

e.g 3rd worker brought in more rev than 2nd

Because of specialisation gains and excess land and capital being utilised

so more productive than previous works so MRP was increasing

24
Q

After 3rd worker 4,5,6 workers suffer from lower productivity why ?

A

constraints from FFOP of capital and land become an issue

e.g bump into each otehr as not enough capital

and individual productivity starts to decrease so MRP falls

25
Q

why is wage rate constnatly 60

A

because we assume firms are operating in perfectly comp labour market therefore wage takers

26
Q

as firms operating in perfectly comp they are wage takers what does this mean

A

no control over wage paid 2 employers

27
Q

as firms have no contrl over wage paid tehy must take….

so…

A

Must take wage rate set in industry labour market and give it workers thats why its constant for every worker

28
Q

wage rate =

A

marginal cost of labour

29
Q

Why is wage rate equal to marginal cost of labour

A

because its constant

30
Q

explain why age rate = MCL e.g if wage rate is £60

A

Every time hire worker pay extra £60 which is constant hence marginal cost of labour

31
Q

MRP can also give us comnditions for

A

firms to maximise revenue brought in from workers

32
Q

in terms of MRP where will firms hire up till

A

MRP = wage

33
Q

lets say my wage rate is 60 and efficiency of # of workes to hire is 5 why wouldnt it make sens to hire mroe than 5

A

If hired 6th worker MC higher than MR

, worker Costs more to firm than what brings in via MRP

So no sense as fmr will lose out on rev

So pointless hiring beyond where MRP = W/MCL

34
Q

ets say my wage rate is 60 and efficiency of # of workes to hire is 5 why wouldnt it make sens to hire less than 5 workers

A

all workers before 5 bring more rev to frmt han cost MR>MC

so by hiring another worker can bring more rev thn cost ,

firm able to maximise its benefit by hiring more workes up till where MRP=MC/ MRP=WAGE

Before this makes no sense to stop as rev higher cost so firms can bring in mre rev if higher more workers

35
Q

KEY CONDITION about firm efficient employment decision

A

to make efficient employment decision should keep hiring workes up till MRP = WAGE i.e MC of labour

Micro Economics (57 decks)

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