The Labour market Flashcards
Why do firms demand labour
A firm demands labour only if profits can be increased by employing more workers
Firms demand labour only if profits can be increased under the assumption that
Households in the goods market demand the goods and services that workers are employed to produce
What is firms demand for labour
firms demand for labour is a derived demand
What is derived demand
derived demand is demand for a good or factor of production wanted not for its own sake, but as a consequence of the demand for something else
Assuming firms are trying to maximise profits, what will happen to demand for labour in the long-run
Assuming firms are trying to maximise profits, thus will lead to no demand for labour in the long run unload the firms employing labour sell the output produced for at least normal profit in the goods market
What is marginal physical product of labour
The addition to a firms total output brought about by employing one more worker
what does the diagram assume
The diagram assumes that labour suffer from diminishing marginal physical productivity whenever more labour is added to fixed capital
what is the marginal revenue product of labour
It is the money value of the addition to a firm’s total output brought about by employing one more worker
What is the equation for marginal revenue product
MRP = MPP x MR
What does the demand curve for labour show
The demand curve for labour shows the relationship between wage rate and number of workers employed
e.g The lower the wage rate, the more labour a single employer, or all the employers, within a labour market are willing to hire
what can case a shift in market demand curve for labour
-A charge in labour productivity
-A change in technology
How can technology shift demand for labour to the right
If technical progress makes labour more productive relative to other factors of production, firms are likely to substitute labour for other factors of production.
-technical progress is likely to improve production and dynamic efficiency, which reduces the cost of making products
how can technology shift demand of labour to the left
Technical progress could lead to firms substituting capital for labour
-Technical progress can also increase the demand for certain types of labour at the expense of workers with other skills, who may lose there job because of it
