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Demand for Labor

Demand for Labor

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Published by mhinton21289511

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Published by: mhinton21289511 on May 09, 2011
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Problem go to solution

Demand of labor Why is the demand of labor a derived demand? Explain the shape of the supply of labor curve. What is the relationship between productivity and the wages earned by an employee? What are some factors that determine the level of your income?
Solution Summary

Demand of labor

Posting ID:334321 - Economics, Microeconomics - Other Created: Aug-09-2010 Solution By OTA: 107335, Albert Li, MSc

Solution go to problem

Demand for labour is a derived demand because the demand for labour is a result of demand for other things (such as goods and services). Nobody would demand labour alone, instead, people demand for goods, the in the production of goods, labour is then demanded (hence it is a derived good). The shape of the supply of labour curve is like any other supply curve, it is upward sloping. The relationship between productivity and the wages earned by an employee is described by the marginal rule. In short, your wage represents your marginal productivity, ie if a society without Tom can produce $4mil every year, and another society, identical to the first one but with Tom, can produce $4.2mil every year, then Tom's wage should be his marginal productivity, which is 0.2mil. The primary factor that determine level of income is your productivity. The more productivity you are, the higher wage you should be paid. There are a few factors that affects income indirectly, such as education, training, access to resource. All of these indirect factors will increase you productivity (a person with higher education is generally considered to be more productive), and hence affects your wage rate.

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