DEMAND OF LABOR What is Demand for Labor? PowerPoint Presentation, PPT - DocSlides

DEMAND OF LABOR What is Demand for Labor? PowerPoint Presentation, PPT - DocSlides

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. . Demand is the different quantities of workers that . businesses. are . willing . and. able. to hire at different wages.. What is the Law of Demand for Labor? . There is an . INVERSE. relationship between wage and quantity of labor demanded.. ID: 757107

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Presentations text content in DEMAND OF LABOR What is Demand for Labor?

Slide1

Slide2

DEMAND OF LABOR

What is Demand for Labor?

Demand is the different quantities of workers that businesses are willing and able to hire at different wages.What is the Law of Demand for Labor? There is an INVERSE relationship between wage and quantity of labor demanded.

2

Slide3

Who demands labor?

FIRMS demand labor.

Demand for labor shows the quantities of workers that firms will hire at different wage rates.

Firms will only pay employees a wage equal to or less than that employees productivity.

DL

Quantity of Workers

Wage

As wage falls, Qd increases.

As wage increases, Qd falls.

3

Slide4

Where do you get the Market Demand?

Q

McDonalds

Wage

Q

L

Dem

$12

1

$10

2

$83$6

5$47

Burger King

Other Firms

Wage

Q

L

Dem

$12

0

$10

1

$8

2

$6

3

$45

WageQLDem$129$1017$825$642$468

Wage

QLDem$1210$1020$830$650$480

Market

3

P

Q

2

P

Q

25

P

Q

30

P

$8

$8

$8

$8

D

D

D

D

Slide5

Drawing the Demand Curve for Factors

5

Slide6

Wage Rate

Q

$100

80

60

40

20

D=MRP

Quantity of Workers

Demand=MRP

1 2 3 4 5 6 7 8

Why is it downward sloping?

Because of the law of diminishing marginal returns

6

Each additional factor is less productive and therefore is worth less than the previous one

Slide7

Wage Rate

Q

$100

80

60

40

20

D=MRP

Quantity of Workers

What happens if demand for the product increases?

1 2 3 4 5 6 7 8

MRP increases causing demand to shift right

7

D

1

=MRP

1

Slide8

Question?

What could be factors that shift the MRP (Factor Demand)?

8

Slide9

3 Shifters of Factor Demand

1.) Changes in the Demand for the Product (Change in Price)

Price increase of the product increases MRP and demand for the factor. (and vice versa)

2.) Changes in Productivity

Technological Advances increase Marginal Product and therefore MRP/Demand.

3.) Changes in Price of Other Factors

Substitute Resources

Ex: What happens to the demand for assembly line workers if price of robots falls? Complementary ResourcesEx: What happens to the demand for nails if the price of lumber increases significantly?

9

Slide10

Units of

Labor

Total

Product

(Output)

Use the following data:

0

1

2

3

4

567

0 71724

27293027

Wage = $20

Price = $10

Marginal

Product

(MP)

-

7

10

7

3

2

1-3

Product

Price

0 10101010101010MarginalRevenueProduct 0 7010070302010-30

AdditionalCost per worker 0 20202020202020How would this change if the demand for the good increased significantly?Price of the good would increase.Value of each worker would increase.10

Slide11

Units of

Labor

Total

Product

(Output)

Use the following data:

0

1

2

3

4

567

0 71724

27293027

Wage = $20

Price = $100

Marginal

Product

(MP)

-

7

10

7

3

2

1-3

Product

Price

0 100100100100100100100MarginalRevenueProduct 11

Slide12

Units of

Labor

Total

Product

(Output)

Use the following data:

0

1

2

3

4

567

0 71724

27293027

Wage = $20

Price = $100

Marginal

Product

(MP)

-

7

10

7

3

2

1-3

Product

Price

0 100100100100100100100MarginalRevenueProduct 0 7001000700300200100-300

Each worker is worth more!!THIS ISDERIVED DEMAND.12

Slide13

Units of

Labor

Total

Product

(Output)

Use the following data:

0

1

2

3

4

567

0 71724

27293027

Wage = $20

Price = $10

Marginal

Product

(MP)

-

7

10

7

3

2

1-3

Product

Price

0 10101010101010MarginalRevenueProduct 0 7010070302010-30

AdditionalCost per worker 0 20202020202020How would this change if the productivity of each worker increased?Marginal Product would increase.Value of each worker would increase.13

Slide14

Units of

Labor

Total

Product

(Output)

Use the following data:

0

1

2

3

4

567

0 70170240

270290300270

Wage = $20

Price = $10

Marginal

Product

(MP)

-

70

100

70

30

20

10-30

Product

Price

0 10101010101010MarginalRevenueProduct 0 7001000700300200100-300

Each worker is worth more!More demand for the resource.14

Slide15

Identify the Resource and Shifter (

ceteris paribus

):

Increase in demand for microprocessors leads to a(n) ________ in the demand for processor assemblers.Increase in the price for plastic piping causes the demand for copper piping to _________.Increase in demand for small homes (compared to big homes) leads to a(n) _________ the demand for lumber.For shipping companies, __________ in price of trains leads to decrease in demand for trucks.Decrease in price of sugar leads to a(n) __________ in the demand for aluminum for soda producers.Substantial increase in education and training leads to an ___________ in demand for skilled labor.

15

3 Shifters of Resource Demand

Slide16

Identify the Resource and Shifter (

ceteris paribus

):

Increase in demand for microprocessors leads to a(n) ________ in the demand for processor assemblers.Increase in the price for plastic piping causes the demand for copper piping to _________.Increase in demand for small homes (compared to big homes) leads to a(n) _________ the demand for lumber.For shipping companies, __________ in price of trains leads to decrease in demand for trucks.Decrease in price of sugar leads to a(n) __________ in the demand for aluminum for soda producers.Substantial increase in education and training leads to an ___________ in demand for skilled labor.

increase

increase

decrease

decrease

increase

increase

16

3 Shifters of Resource Demand

Slide17

Factor Supply (Labor Supply)

17

Slide18

SUPPLY OF LABOR

What is Supply for Labor?

Supply is the different quantities of

individuals that are willing and able to sell their labor at different wages. What is the Law of Supply for Labor?There is (Usually) DIRECT (or positive) relationship between wage and quantity of labor supplied.

18

Slide19

Labor Supply

Supply of labor is the number of workers that are willing to work at different wage rates.

Higher wages can give workers incentives to leave other industries or give up leisure activities (Activities done outside of work)

Quantity of Workers

Wage

As wage increases, Qs increases.

As wage decreases, Qs decreases.

Labor Supply

19

Slide20

Questions

What could be shifters of factor supply (workers) (MRC)?

20

Slide21

Factor Supply Shifters

Supply Shifters for Labor

Number of qualified workers

Education, training, & abilities requiredImmigration Government regulation/licensingEx: What if waiters had to obtain a license to serve food?Immigration policies 3. Personal values regarding leisure time and societal roles.Ex: Why did the US Labor supply increase during WWII?

Why do some occupations get paid more than others?

Slide22

With your partner...

Use supply and demand analysis to explain why surgeons earn an average salary of $137,050 and cashiers earn $11,000. How could wages change for either profession?

Slide23

With your partner...

Use supply and demand analysis to explain why surgeons earn an average salary of $137,050 and cashiers earn $11,000. How could wages change for either profession?

Quantity of Workers

Wage Rate

S

L

D

L

Supply and Demand For Surgeons

Supply and Demand For Fast Food

Cashiers

Quantity of Workers

Wage Rate

S

L

D

L

Slide24

Industry in Equilibrium

Wage (the price of labor) is set by the market.

EX: Supply and Demand for Fast Food Workers

Quantity of Workers

Wage

Labor Supply

Labor Demand =

MRP

$8.75hr

THE

WAGE RATE

24


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