3.5.1 Demand for labour

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Last updated 9:48 AM on 4/12/26
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8 Terms

1
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DEMAND FOR LABOUR

  • quantity of labour that employers would wish to hire at each wage rate

2
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DERIVED DEMAND

  • demand for labour is driven by demand for final product

  • businesses only want workers for as long as people are willing and able to buy product they produce

3
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FACTORS THAT INFLUENCE DEMAND FOR LABOUR

  • wage rates

  • demand for final product

  • productivity of labour

  • wages in other countries

  • technology (substitutes)

4
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FACTORS THAT INFLUENCE DEMAND FOR LABOUR- WAGE RATE

  • inverse relationship between wage rate and quantity of labour

  • as wage rates increase, demand for labour contracts since MRP of labour must be higher for it to be worthwhile employing more people- so less employed

<ul><li><p>inverse relationship between wage rate and quantity of labour</p></li><li><p>as <mark data-color="blue" style="background-color: blue; color: inherit;">wage rates increase,</mark> demand for labour contracts since MRP of labour must be higher for it to be worthwhile employing more people- so <mark data-color="blue" style="background-color: blue; color: inherit;">less employed</mark></p></li></ul><p></p>
5
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FACTORS THAT INFLUENCE DEMAND FOR LABOUR- DEMAND FOR FINAL PRODUCT

  • firms won’t employ people if goods made aren’t going to be sold and make a profit (derived demand)

  • increase in demand for product leads to an increase in demand for labour (right shift)

6
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FACTORS THAT INFLUENCE DEMAND FOR LABOUR- PRODUCTIVITY OF LABOUR

  • more productive workers are, higher the demand for labour

  • can be increased w/ education and training, and by using tech

7
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FACTORS THAT INFLUENCE DEMAND FOR LABOUR- WAGES IN OTHER COUNTRIES

  • if wages are lower in other countries and wages in the UK are relatively high, more people will be employed in other countries as it represents a lower cost for businesses

  • means that demand in the UK is low

8
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FACTORS THAT INFLUENCE DEMAND FOR LABOUR- TECHNOLOGY (SUBSTITUTES)

  • if machinery and equipment becomes cheap, employers will switch labour for machinery- so decrease in demand for labour (left shift)

<ul><li><p>if machinery and equipment becomes <mark data-color="green" style="background-color: green; color: inherit;">cheap</mark>, employers will switch labour for machinery- so decrease in demand for labour (left shift)</p></li></ul><p></p>