Question

what are the factor(or factors) that determine the quantity of labor demanded?

Answer 1

The factors that effect the quantity of labor demanded are-

1)Wage rate - The increased wage rate will cause less demand for labour.In this case, labor demand curve will fall.If wage rate continues to rise, firms will substitute either capital or cheap labor in place of expensive labor.And if the firms don't use substitute then their labor cost will increase resulting in fall in profits.So, in any case , quantity demanded for labor will decline with rise in wages.

2) Demand for goods - The quantity demanded for the labor depends on the demand for goods that are produced by the labor.With increased demand for goods, the firms will also increase their demand for labor for making more goods.

3) Labor productivity level - Productivity of labor means the goods produced by a single worker. Their demand increase if their Productivity level is high.It depends on their education level, skills, training and usage of technology.

4) Profits of the firm - The firm which has higher profits can afford more labor resutling in increased demand but demand will fall for firms which have declining profits.

5) Substitutes - It the prices of substitute good like machinery falls and it is less costly to firms than labor, so firms will shift to substitute good causing fall in demand for labor.

6) Employment subsidies by government - The firms demand for labor will increase with the availablity of employment subsidies by government.