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Single Factor Demand (Labor)

factor market - shows how much the firm demands units of labor (or other factor)  

  • combines utility, isoquants, and market
  • marginal revenue product of labor (MPRL) - additional revenue from the extra output that would result from hiring another unit of labor
    • MPRL = (MR)(MPL)
    • in competitive market, MR=P >> MPRL = (P)(MPL)
    • will hire more if extra revenue exceeds the cost
    • cost = wage = w >> usually constant

 

  • cost function
  • MPRL
  • lower cost >> wage shift >> increased demand in labor
Subject: 
Economics
Subject X2: 
Economics

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