The Labour Market Flashcards
What type of demand is labour?
Derived demand
What does the marginal productivity theory say?
The demand for any factor of production depends on its marginal revenue product (MRP)
What is marginal revenue product?
The extra revenue gained by the firm from employing one more worker
What is the formula for marginal revenue product?
MRP = MPP X MR
What is the marginal physical product of labour(MPP)?
The output produced by each additional worker
What is the marginal cost of labour?
The cost of hiring one additional worker
When does a firm have an optimal number of workers?
When MRP of labour is equal to MC of labour
When is a firm employing too few workers?
When MRP of labour is greater than MC of labour
When is a firm employing too many workers?
When MRP of labour is less than MC of labour
What is a firm’s demand for labour generally affected by?
Productivity
What do high unit costs suggest?
There is low productivity
What is an individual’s labour supply?
The total number of hours which that person is willing to work at a given wage rate
What is the labour supply for an occupation?
The number of workers willing to work in that occupation at a given wage rate
What is supply of labour in the long run determined by?
Monetary and non-monetary factors
What is a monetary benefit?
The welfare a worker gains from the wage they receive