Demand and Supply of Labour

In economic theory, what happens to the demand for labour as the price of labour increases?

• It remains constant
• It increases
• It decreases
• It fluctuates randomly

In the long run, how do firms typically respond to an increase in the wage rate?

• By hiring more workers
• By substituting machines for workers
• By reducing the production output
• By increasing the number of fixed factors of production

What concept describes the situation where the addition of more workers leads to a decrease in the marginal output per worker?

• Law of Demand
• Law of Supply
• Law of Diminishing Returns
• Law of Equilibrium

Which factor determines whether a firm will employ additional workers in the short run?

• Marginal Revenue Product
• Total Physical Product
• Fixed Costs
• Average Revenue

What does the marginal revenue product of labour represent for a perfectly competitive firm?

• Extra output produced by an additional worker
• Extra revenue produced by an additional worker
• Extra cost incurred by an additional worker
• Extra profit generated by an additional worker

How does the availability of substitutes for labour affect the elasticity of demand for labour?

• Higher availability leads to higher elasticity
• Higher availability leads to lower elasticity
• It has no impact on elasticity
• It is inversely related to the elasticity

In what situation would an increase in unit labour costs have the smallest impact on employment by the firm?

• When wages account for a large proportion of total cost
• When wages account for a small proportion of total cost
• When the demand for the product is elastic
• When the demand for the product is inelastic

Which factor is directly correlated with the elasticity of demand for labour in an industry?

• Proportion of labour cost to total cost
• Price elasticity of demand for the product
• Availability of substitutes for labour
• Time period for adjustment

What effect does an increase in labour productivity have on the demand for labour?

• It decreases demand for labour
• It increases demand for labour
• It has no effect on demand for labour
• It decreases the elasticity of demand for labour

What does a supply curve for an individual worker illustrate?

• The relationship between wages and leisure time
• The quantity of labour supplied at different wage rates
• The demand for labour in the market
• The elasticity of labour demand