Demand for labour

• Demand for Labour

  The number of workers firms are willing and able to employ at a given wage rate
• Derived demand for labour

  Demand for workers as a result of there being demand for the goods and services that they produce
• Factors affecting the demand for labour in an industry -> link to change in ( MRP = MP X MR )

  > Wage

  > Price of the product - If price increase MR increase MRP increase

  > Demand for the product - derived demand

  > Productivity ( labour and capital) -> affects MP of labour

  > Capital ( price of capital ) -> substitute effect
• Wage elasticity of demand for labour

  The responsiveness of the quantity of labour demanded by firms to a change in the wage rate
• Factors affecting the wage elasticity of demand for labour ( SECT )

  1. Substitutability of capital for labour
  2. Elasticity of the final product (PED)
  3. Cost of labour as a percentage of total cost
  4. Time period - LR all factors of production are variable much easier to increase capital so wage elastic
• Labour productivity

  Output per worker in a certain time period
• Unit labour costs

  Average cost per worker, including wages, taxes and national insurance
• Marginal Revenue (MR)

  This is the revenue that a firm gains from selling the last unit of output. It is related to price.
• Marginal physical product (MPP)

  This is the increase in output that an extra worker produces.
• Marginal revenue product theory(MRP)

  MPP x MR.​ MRP is effectively the increase in revenue a firm gains from employing an extra worker.​ Firms will hire workers up until MRP = W (MC) -as they are assumed to be profit maximisers​. MRPL is the labour demand curve.
• wage determination in a competitive market

  A) MRP

  B) AC = MC

  C) Firm

  D) Industry

  E) s

  F) D