After you have worked through this section of the learning unit, you should be able to:
- graphically represent the market demand for labour
In the previous sections, we look at the demand for labour from the perspective of an individual producer. What we are however interested in is the market demand for labour. Assuming that we are operating in a perfectly competitive labour market and we know that there are many producers in this market that produce the same product. To obtain the labour market demand schedule, we add all the individual labour demand schedules. This labour market demand schedule has the same properties as the individual labour demand schedules and it indicates that a negative relationship exists between the wage rate and the quantity of labour demanded. This labour market demand is represented graphically in the following diagram:
Indicate whether the following statements relating to the demand for labour is true or false:
Use the data in the following table to:
|Units of labour||Total product (pairs of shoes)
|Marginal product (pairs of shoes)
|Price per pair of shoes
|Marginal revenue product
a. Draw the demand for labour curve.
b. Indicate how many units of labour will be employed at a wage rate of R280.
c. Indicate how many units of labour will be employed at a wage rate of R700.
d. What happens with the unit of labour employed if the wage increases?