demand for labour

• what is the labour market?

  collection of buyers and sellers of labour
• define demand for labour?

  The quantity of labor that employers are willing to hire at a given wage rate in a given time period
• what does it mean by labour is a derived demand?

  This means that demand for labour depends on the demand for the goods and services they produce, for example the demand for labour in a recession is low this is because there is no demand for the actual good or service
• what is the marginal revenue product theory?

  it means that demand for labour is equal to the extra revenue each additional unit of labour will generate
• what are the assumptions of the MRP theory?

  perfect competition in product market and labour market

  perfect knowledge

  time period is short run

  firms aim to maximise profits

  perfect mobility
• how to calculate MRPL?

  MPPL x MR
• evaluation of MRP theory? can we really use it

  1. very difficult to measure productivity in some sectors e.g not sales or production
  2. discriminatory wages e.g race gender culture
• extension/contraction in demand of labour ?


  this is due to a decrease in wage rate causing an increase in demand for labour as firms are able to afford more

  however if wages increase there will be a decrease in demand for labour
• what shifts the demand for labour ?

  • any non wage factors e.g productivity/inc demand for good
• what are the factors affecting demand for labour?

  • price of good and services>higher price>higher MRPL>higher demand
  • higher demand for good>higher demand for labour
  • changes in technology>if theres any advances in technology it will require specific type of workers > higher demand for labour
  • number of firms > more firms > more labour > demand curve shifts right > inc demand for labour
  • productivity of labour> higher productivity>more cost efficient than capital>inc demand for labour
• what is WEDL?

  the degree or responsiveness of Qd of labour to the change in wage rate
• what is wage elastic demand for labour ?

  when a small percentage change in wage rate leads to a large percentage increase in quantity demanded

  
• what is wage inelastic demand for labour?

  large % change in wage rate leads to small percentage inc in Qd for labour

  
• what are factors effecting elasticity?

  1. time period>short run demand will be less elastic > but in long run its more elastic due to the fact that its easier to switch factors of p
  2. ped of final product > if demand for good was inelastic > then it was inelastic for labour too> leading for those higher costs to be passed onto consumers
  3. ease of factor substitution> if easy and affordable. to switch from capital to labour then demand is likely to be highly elastic
• Name three factors that affect elasticity

  Time period, ped of product, ease of factor substitution