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Demand for Labour (Determinants (Wage rate. A rise in the wage rate above…
Demand for Labour
Determinants
Wage rate. A rise in the wage rate above any rise in labour productivity will raise unit labour costs
Complementary labour costs, e.g. NI contributions
MRP/Productivity. The higher the output per worker hour, the more attractive labour is as a resource
Substitutes for labour, e.g. if the price of machines fall and workers can be replaced then demand for labour will decrease
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Elasticity of demand for labour
= % change in the quantity of labour demanded/ % change in wage rate
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