Demand for Labor for economics value of marginal product of labor PDF

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demand for labor, graphs, explanation and computation of mrp and mpl value of marginal product of labor...

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Demand for Labor - Is the amount of labor that firms are looking to hire. -

Which is known as “Derived Demand”, which is an indirect demand formed out of need to provide goods and services.

If demand for firm’s product increases, the firm will demand more labor in order to sell the additional output.  Marginal Product of Labor (MPL) – refers to a company’s increase in total production when an additional unit of labor is added (in most cases, one additional employee).  Marginal revenue product (MRP), also known as the marginal value product – is the additional amount of revenue a firm can generate by hiring one additional employee. Formula: MRP = MPL x Price  Marginal Resource Cost – payment of the additional man-hour of labor. Demand Curves represent the relationship between wage and quantity demanded of an item.

This data is for individual firm and this firm is in short-run, meaning it is experiencing law of diminishing of marginal returns; as more workers are hired, the marginal product of labor begins declining, causing the marginal revenue product of labor to

fall as well. Let assume this is a perfect competition, hence they are price takers, going price is $20, going rate for labor is $60/day. Calculate for MPL and MRP; How many workers should firm hire? No. of worker

TPP/Output

MPL

MRP

1

6

6

120

2

14

8

160

3 4

24 32

10 8

200 160

5

35

3

60

6

36

1

20...