3.5.1 Demand for labour

• What is the labour market composed of?

  • Sellers of labour (households)
  • Buyers of labour (firms)
  • Workers supply their labour & firms demand their labour.
• What is the demand for labour?

  Derived demand.

  • It depends on the demand for goods/services.
  • If demand for goods/services increases then the demand for labour will increase.
• What factors influence the demand for labour?

  • The price of the product being produced
  • The demand for the final product
  • The ability to substitute capital (machinery) for labour
  • The productivity of labour
• What is marginal revenue product of labour?

  The extra revenue generated when an additional worker is employed.