The Demand for a Factor of Production The value of marginal product curve passes through the midpoints of the bars. The VMP of the 3rd worker is $10 an hour. So at a wage rate of $10 an hour,the firm hires 3 2 3 4 workers on its demand for Quantity of labor (number of workers) labor curve. (b)Demand for labor 2012 Pearson Education
© 2012 Pearson Education The value of marginal product curve passes through the midpoints of the bars. The VMP of the 3rd worker is $10 an hour. So at a wage rate of $10 an hour, the firm hires 3 workers on its demand for labor curve. The Demand for a Factor of Production
The Demand for a Factor of Production Changes in a Firm's Demand for Labor The firm's demand for labor depends on The price of the firm's output The prices of other factors of production ■Technology 2012 Pearson Education
© 2012 Pearson Education Changes in a Firm’s Demand for Labor The firm’s demand for labor depends on The price of the firm’s output The prices of other factors of production Technology The Demand for a Factor of Production
The Demand for a Factor of Production The Price of the Firm's Output The higher the price of a firm's output,the greater is the firm's demand for labor. The price of output affects the demand for labor through its influence on the value of marginal product of labor. If the price of the firm's output increases,the demand for labor increases and the demand for labor curve shifts rightward. 2012 Pearson Education
© 2012 Pearson Education The Price of the Firm’s Output The higher the price of a firm’s output, the greater is the firm’s demand for labor. The price of output affects the demand for labor through its influence on the value of marginal product of labor. If the price of the firm’s output increases, the demand for labor increases and the demand for labor curve shifts rightward. The Demand for a Factor of Production
The Demand for a Factor of Production The Price of Other Factors of Production If the price of using capital decreases relative to the wage rate,a firm substitutes capital for labor and increases the quantity of capital it uses. Usually,the demand for labor will decrease when the price of using capital falls. 2012 Pearson Education
© 2012 Pearson Education The Price of Other Factors of Production If the price of using capital decreases relative to the wage rate, a firm substitutes capital for labor and increases the quantity of capital it uses. Usually, the demand for labor will decrease when the price of using capital falls. The Demand for a Factor of Production
The Demand for a Factor of Production Technology New technologies decrease the demand for some types of labor and increase the demand for other types. For example,if a new automated bread-making machine becomes available,a bakery might install one of these machines and fire most of its workforce-a decrease in the demand for bakery workers. But the firms that manufacture and service automated bread-making machines hire more labor,so there is an increase in the demand for this type of labor. 2012 Pearson Education
© 2012 Pearson Education Technology New technologies decrease the demand for some types of labor and increase the demand for other types. For example, if a new automated bread-making machine becomes available, a bakery might install one of these machines and fire most of its workforce—a decrease in the demand for bakery workers. But the firms that manufacture and service automated bread-making machines hire more labor, so there is an increase in the demand for this type of labor. The Demand for a Factor of Production