Chapter 3 Lecture Notes This chapter focuses on the demand for labor. This demand is called a derived demand, because it comes from the demand for the products that thespians produce. The key to understanding where an individual unassailables demand curve for labor comes from is to realize that every baksheesh on the demand curve is the result of an optimization finish by the firm. At a given wage rate, the measure that is read off the demand curve represents the profitmaximizing level of manipulation for that wage rate. As the firm hires more workers, total make will change magnitude. But the fringy product of labor (MPL), the measuring rod of supernumerary output associated with an spare unit of labor, is assumed to finally decrease. Holding the investment firm of capital constant, hiring one and only(a) more worker may initially result in an increase in the MPL, due to gains from specialization or cooperation. However, at some point, hiring one more worker will eventually result in a lower marginal product than that of the previous worker. This occurs because with a fixed stock of capital, capital will become remarkable relative to the number of workers, and thus the productivity of each spare worker will be less diminishing marginal returns.
In the short run, with the firms capital stock fixed, there is one guiding principle behind the profit-maximization strategy. The firm will maximize profits when the marginal (extra) revenue associated with hiring an additional unit of labor (MRL) just satisfactorys the marginal expense of hiring an additional unit of labor (MEL). If this condition is not met, a window of opportunity exists for the firm to change its employment level and increase its profits. The marginal revenue associated with an additional unit of labor is called the marginal revenue product of labor (MRPL) since it can be shown that it is equal to (MR)Ã(MPL). o MR is the marginal revenue associated with the sale of an additional unit of output. o MPL is the marginal product (physical...If you want to get a full essay, order it on our website: Ordercustompaper.com
If you want to get a full essay, wisit our page: write my paper