Question

1. Complete the following table (5X1=5 marks)

Determinants of demand for labor	Effect on demand for Capital
Increase in cost of labor	decreases
A rise in demand for consumer goods	Increases
A decline in the productivity of labor
A decline in wages of labor
Improve in productivity of Capital

2. Complete the following table (5X1=5 marks)

Determinants of demand for labor	Effect on demand for labor
Increase in Cost of Capital
Fall in demand for goods and services
A decline in the productivity of labor
A decline in the price of machines
Fall in productivity of Capital

Answer 1

Decline in productivity of labor - decrease demand

If productivity of labor declines then MP of labour decline which resut in less output per additional labour so firm will decrease demand

Decline in wages of labor - increases demand

If wages decline then firms will demand more labor in the market

Improve in productivity of capital - increase demand

If productivity of capital improves then more efficiency and output be increase so more demand

Increase in cost of capital - decrease demand

If cost of capital increase then input costs increase thus decrease in profits of firms so firms will decrease demand

Fall in demand for goods and services - decrease demand

Decline labor productivity - decrease demand

Decline in price of machines - increase demand

Cost of production Decreases when price of machines decline hence more profits so firm will increase demand

Fall in productivity of capital - decrease demand

Decrease productivity results in decrease in output this less demand