2. Labour Markets - Labour Demand & MRP (Firm) Flashcards Preview

Economics - MicroEconomics > 2. Labour Markets - Labour Demand & MRP (Firm) > Flashcards

Flashcards in 2. Labour Markets - Labour Demand & MRP (Firm) Deck (4)
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1
Q

What does the demand curve for labour look like for an entire industry?

A

It is a downward sloping linear demand curve - in truth it should be an identical shape to the MRP for an individual firm but we draw it straight to simplify it

2
Q

What type of relationship is there between wage and quantity of workers and why?

A

There is an inverse relationship between wage and quantity of workers because in the long-run firms may move towards capital machinery to replace workers if they become comparatively more expensive. Cheaper workers are more competitive in this regard.

3
Q

Essentially what dictates the shape of the MRP curve in the long and short-run?

A

SR - Law of Diminishing Returns - slopes downLR - Substitutability of labour and capital

4
Q

How does MRP dictate the wage workers get?

A

Workers with a very high MC will (wage rate) will only be considered for employment if they have an equally high MRP otherwise its financially unwise for the firm.

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