Labour demand curve shifts

• Besides the wage itself, what other factors can shift the labor demand curve?

  PDPC
• How can understanding MRP help explain shifts in the labor demand curve?

  It shows how factors increase/decrease labor demand
• What does the first 'P' in PDPC stand for regarding labor demand shifters?

  Change in the final product price
• How does a change in the final price of a product affect the MRP?

  It directly impacts marginal revenue
• If the price of a product increases, what happens to the MRP of the worker making it?

  MRP increases, demand shifts right
• What does the 'D' in PDPC stand for in the context of labor demand?

  Demand of the final product
• How does an increase in the demand for a final product affect the demand for labor?

  Demand for labor increases
• Why is labor demand considered a derived demand?

  It depends on product demand
• What does the second 'P' in PDPC represent as a labor demand shifter?

  Change in productivity
• How does a change in labor productivity affect the marginal product of labor?

  It directly affects it
• How does an increase in labor productivity affect MRP and the demand curve?

  MRP increases, demand shifts right
• What does the 'C' in PDPC signify regarding shifts in labor demand?

  Change in the price of capital
• What decision must firms make in the long run regarding labor and capital?

  Whether to hire more workers/capital
• Why are labor and capital considered substitutable in the long run?

  Firms can choose between them
• If the price of capital decreases, what likely happens to the demand for labor?

  Demand for labor decreases
• How does the price of capital relate to the demand for labor when capital is a substitute?

  Inversely related
• If the price of capital increases, how will firms likely adjust their demand for labor?

  Demand for labor increases
• On a labor market diagram, what is typically on the y-axis?

  Wage or output
• On a labor market diagram, what is typically on the x-axis?

  Quantity of workers
• How do non-wage shifters affect the quantity of workers demanded?

  Irrespective of the wage
• How do the factors described by "PDPC" affect the labor demand curve?

  • *P*rice of the final product: Higher price increases MRP, shifting demand to the right.
  • *D*emand for the final product: Higher demand increases labor demand.
  • *P*roductivity: Increased productivity increases MRP, shifting demand to the right.
  • *C*ost of capital: Lower capital cost decreases labor demand if capital is a substitute.
• What impact do factors other than wages have on the labor demand curve?

  They shift the curve
• How is Marginal Revenue Product (MRP) calculated?

  Marginal product x marginal revenue
• How do shifts in labor demand affect the labor market diagram?

  • Rightward shift: Increases quantity of workers at any given wage.
  • Leftward shift: Decreases quantity of workers at any given wage.