1 - demand for labour

Question 1

what is the demand for labour?

Answer 1

the number of workers firms are willing and able to employ at the current wage rate

Question 2

What is MRP?

Answer 2

the additional revenue gained from the extra output produced as a result of employing one more worker

Question 3

What are the determinants of an increase in demand for labour?

Answer 3

1) increase in demand for the good
2) increase in price of substitute good
3)increase in productivity of labour
4) increase in the price of capital
4)fall in the costs of labour eg national insurance contributions

Question 4

how does an increase in demand for the good lead to an increase in demand for labour?

Answer 4

The rise in demand will incentivise firms to increase production, so will demand more factors of production, so labour is derived demand

Question 5

How does an increase in productivity lead to an increase in demand for labour?

Answer 5

each worker can produce more output at a lower cost to the firm, so firms make higher profits, so they are incentivised to increase production …. derived demand

Question 6

What are the limitations of MRP theory?

Answer 6

How easy it is to measure productivity - relies on normative estimates
1) service sector vs manufacturing
2) teamwork
3) self-employed

Question 7

What are the determinants of elasticity of demand for labour?

Answer 7

1)proportion of labour costs to total costs
2) elasticity of demand for the good, necessity?
3)substitutability of labour with capital

Question 8

what is the elasticity of demand for labour?

Answer 8

measures the change in the quantity of labour demanded as a result of a change in the wage rate

Question 9

What does a firms individual demand curve for labour show?

Answer 9

law of diminishing returns

Question 10

why is the demand curve for the industry downward sloping?

Answer 10

due to the substitutability of labour and captial - at higher wage rates firms will invest in capital instead