4.1.6.1 The demand for labour, MP theory - NOTES

What is the demand for a factor of production, such as labour, derived from?

• The cost of production

• The interest rates

• The demand for the final product or output

• The number of factories

According to the marginal productivity theory, firms will hire workers up to the point where:

• The marginal revenue product of labour equals the wage rate

• The total revenue equals total costs

• The demand for products becomes constant

• The supply of labour exceeds demand

What does the demand curve for labour illustrate?

• The impact of labour laws on wages

• The correlation between wages and employee satisfaction

• The relationship between labour demand and product demand

• The relationship between the wage rate and the quantity of labour demanded

What happens to the quantity of labour demanded when the wage rate increases?

• It remains constant

• It fluctuates unpredictably

• It increases

• It decreases

Which factor can cause a shift in the demand curve for labour to the right?

• An increase in demand for the final product

• A decrease in demand for the final product

• A decrease in technology use

• An increase in the price of substitute inputs

What effect does technological advancement that increases labour productivity have on the demand for labour?

• It reduces the quality of products

• It has no effect on the demand for labour

• It decreases the demand for labour

• It increases the demand for labour

What is the elasticity of demand for labour?

• The responsiveness of the quantity of labour demanded to changes in the wage rate

• The change in wage rate in response to changes in labour laws

• The ratio of employed to unemployed workers

• The total number of workers available in the market

Which scenario would likely make the demand for labour more elastic?

• Decrease in competition in the market

• Availability of substitute inputs like capital or technology

• Increase in government subsidies for labour

• Short-term contracts and agreements

What happens to the demand for labour if labour costs represent a significant portion of total costs for firms?

• The demand for labour does not change

• The demand for labour becomes more elastic

• The demand for labour becomes less elastic

• The demand for labour becomes more inelastic

Which industry characteristic may lead to more elastic demand for labour?

• Industries with monopolistic control

• High levels of competition and easy entry and exit

• Industries with limited technological advancements

• Industries with stringent government regulations