Th3.5: Factors Influencing Demand for Labour

Question 1

What are the first three factors influencing demand for labour?

Answer 1

wage rates
demand for the product
prices of other factors of production

Question 2

What are the final three factors influencing demand for labour?

Answer 2

wages in other countries
technology
regulation

Question 3

Wage rates

Answer 3

a wage is the price of labour and so has the same influence on demand for labour as price has on demand for a product as wage rates increase, demand for labour contracts since MRP of labour must be higher for it to be worthwhile employing more people

Question 4

Demand for the product

Answer 4

since labour is a derived demand, if there is no demand for the product, there is no demand for labour. an increase in demand for the product leads to an increase in demand for labour

Question 5

What concept is demand for the product linked to?

Answer 5

the concept of MRP - an increase in output or price of a good will increase demand for the labour that produces that good

Question 6

Prices of other factors of production

Answer 6

if machinery and equipment becomes cheap, people will switch machinery for labour and therefore the demand for labour will fall

Question 7

Wages in other countries

Answer 7

if wages are lower in other countries and therefore wages in the UK are relatively high, people will be employed in other countries as it represents a lower cost for business - this means demand in the UK is low

Question 8

Technology

Answer 8

improvements in computers and technology means that many jobs have been lost with the work being done by machines - this means there is less demand for labour, but demand for labour in technological based industries is increasing

Question 9

Regulation

Answer 9

as laws are passed some jobs disappear whilst others are made. high regulation within the labour market is likely to discourage firms from hiring since it can be very costly and time consuming so this will reduce demand for labour in these areas

Question 10

The demand for labour is also affected by the state of the economy?

Answer 10

when the economy is in a poor state, there will be low demand for the product - moreover the state of the economy affects expectations for the future and business confidence