Demand For Labour

Question 1

Demand for labour shape of curve (2)

Answer 1

Downward sloping = higher the price of labour, the less labour firms will hire
In the long run if the wage rate is high firms will substitute labour for capital

Question 2

Definition of demand for labour

Answer 2

Willingness and ability of firms to hire workers at a given wage rate

Question 3

What is labour determined by short run (3+)

Answer 3

Short run = diminishing marginal returns
As more labour is hired productivity falls
The lower the wage the more workers will be hired = bigger gap between the marginal revenue gained from the worker and the marginal cost of having the worker

Question 4

What is labour determined by long run (2+)

Answer 4

By the wages and whether or not the firm chooses to be capital intensive or labour
Poorer countries = cheaper labour = firms will choose labour intensive methods of production

Question 5

Marginal revenue product what

Answer 5

How much revenue each worker generates for a business

Question 6

Marginal revenue cost what

Answer 6

How much each additional worker costs the business = their wages

Question 7

How to calculate MRP

Answer 7

marginal physical product x price of product

Question 8

Why would there be a shift (2)

Answer 8

Price of what’s produced changes
Physical output per worker changes = productivity

Question 9

What is demand for L derived from (2)

Answer 9

Derived from the demand for a particular good or service
If demand falls for the good, demand for labour will also fall

Question 10

What is elasticity for demand for labour

Answer 10

Measure of how responsive labour demanded is to change in the price of labour (the wage rate)

Question 11

Price elasticity of labour determinants (4)

Answer 11

Time = the longer the time period the easier it is to substitute = elastic in long run
Availability of substitutes
Elasticity of demand for the product
The proportion of labour costs to total cost