3.5.1 - Demand for Labour

• What is the definition of labour demand?

  Quantity of labour employers want to hire
• What does derived demand depend on?

  Demand for goods/services produced by labour
• What is the relationship between wage rate and labour demand?

  Higher wages can increase costs, reducing demand
• How does productivity affect labour demand?

  More productive workers increase demand
• What role does technology play in labour demand?

  Technology can replace or complement labour
• How does the price of substitutes affect labour demand?

  Cheaper capital may reduce labour demand
• What is the difference between short-run and long-run labour demand?

  Short-run is less flexible than long-run
• What happens to labour demand when minimum wage is raised?

  It may create surplus, leading to unemployment
• How does market structure affect labour demand?

  Competitive markets have more elastic labour demand
• What are the factors affecting labour demand?

  • Wage Rate
  • Productivity
  • Substitute Inputs
  • Complementary Inputs
  • Technology
  • Proportion of Labour Costs
  • Time Period
• What are the determinants of elasticity of labour demand?

  • Availability of substitutes
  • Time period (long-run vs short-run)
  • Proportion of total costs
• What is the impact of raising the minimum wage on the labour market?

  • May create labour surplus
  • Can lead to unemployment if above equilibrium wage
• How does the elasticity of labour demand vary in different market structures?

  • Competitive markets: more elastic demand
  • Monopolies: less elastic demand
• What is the summary of labour demand factors?

  • Depends on product demand
  • Influenced by wages, productivity, technology
  • Elasticity affects response to wage changes
  • Market structure and policies impact dynamics