What determines the current demand for labour?

Expert Solution

The current demand for labor is determined by the following factors:

-- Quantity used of the cooperating inputs: If the quantity of a cooperating input such as capital is high there will be more demand for labour

-- Product price: When the price of the good is high the is likely to be the demand curve of the labour

-- Wage rate: There is an inverse relationship among the wage rate and demand for labour

-- Substitution effect: When capital can be substituted for labour, then the demand for labour is often less

-- Elasticity of demand for a good: When the demand for a good is inelastic, the demand for labour used in producing that good would also be inelastic.

-- Peak business cycle: When business cycle is at peak the demand for labor is high

-- Law of diminishing marginal product of labour: An employer will hire more and more labour units until the rate of wage becomes equal to it's marginal revenue from the production.

Rahul Sunny answered 8 months ago

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