Edexcel A Level Economics A:复习笔记3.5.1 Demand for Labour

Factors That Influence The Demand for Labour

  • The labour market is composed of sellers of labour (households) & buyers of labour (firms)
    • Workers supply their labour & firms demand labour
  • The demand for labour is a derived demand
    • This means that it depends on the demand for goods/services
      • If demand for goods/services increases then the demand for labour will increase - and vice versa

Factors That Influence The Demand for Labour

The price of the product being produced The demand for the final product
 

  • If the selling price of the product increases, it increases the marginal revenue product of labour & the firm will demand more labour
  • Higher priced products incentivise firms to supply more (law of supply) & demand for labour will continually increase with increasing prices
 

  • As demand for labour is a derived demand, when an economy is booming then demand for most goods/services will be high - and the demand for labour will be high
  • Conversely, when an economy is in a recession demand for most goods/services will be lower - and the demand for labour will be lower
The ability to substitute capital (machinery) for labour The productivity of labour
 

  • Firms will constantly evaluate if it will be possible & more cost effective to switch production from using labour to capital (machinery)
  • If it is more cost effective, then demand for labour will fall
 

  • If the productivity of labour increases (possibly through training) this will lower average costs & firms will likely demand more labour

 

 

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