3.5
DEMAND FOR LABOUR
FACTORS THAT INFLUENCE THE DEMAND FOR
LABOUR
Labour Market is a factor market - market for factors of production
demand and supply for labour determines wages
WAGE RATES
as wages increase, cost for firms will increase
demand for labour will contract
DEMAND FOR THE PRODUCT
labour is derived demand, if there is no demand for the product, there is no
demand for the labour
firms wont employ people if the goods they are making will not be sold and
make a profit
PRICES OF OTHER FACTORS OF PRODUCTION
if machinery and equipment becomes cheap, people will switch labour for
machinery
demand for labour will fall
WAGES IN OTHER COUNTRIES
if wages are lower in other countries, people will be employed in these other
countries because it is a lower cost for businesses
this results in demand for UK labour being low
TECHNOLOGY
3.5 1
, improvements in technology means that many jobs have been lost with work
being done by machines
less demand for labour
by 2040, 47% of jobs could be lost to technology
REGULATION
high regulation in the labour market - likely to discourage firms from hiring
it can be very costly and time consuming
reduced demand for labour in this market
DIAGRAM
This shows the quantity of labour that employers wish to hire at each possible
wage rate
DEMAND FOR LABOUR AS A DERIVED DEMAND
Labour is a derived demand - it is dependant on the demand for final goods
and services
e.g demand for builders - derived from the demand of houses
if demand for houses increases, demand for builders increases
LAW OF DIMINISHING MARGINAL RETURNS/PRODUCTIVITY
3.5 2
DEMAND FOR LABOUR
FACTORS THAT INFLUENCE THE DEMAND FOR
LABOUR
Labour Market is a factor market - market for factors of production
demand and supply for labour determines wages
WAGE RATES
as wages increase, cost for firms will increase
demand for labour will contract
DEMAND FOR THE PRODUCT
labour is derived demand, if there is no demand for the product, there is no
demand for the labour
firms wont employ people if the goods they are making will not be sold and
make a profit
PRICES OF OTHER FACTORS OF PRODUCTION
if machinery and equipment becomes cheap, people will switch labour for
machinery
demand for labour will fall
WAGES IN OTHER COUNTRIES
if wages are lower in other countries, people will be employed in these other
countries because it is a lower cost for businesses
this results in demand for UK labour being low
TECHNOLOGY
3.5 1
, improvements in technology means that many jobs have been lost with work
being done by machines
less demand for labour
by 2040, 47% of jobs could be lost to technology
REGULATION
high regulation in the labour market - likely to discourage firms from hiring
it can be very costly and time consuming
reduced demand for labour in this market
DIAGRAM
This shows the quantity of labour that employers wish to hire at each possible
wage rate
DEMAND FOR LABOUR AS A DERIVED DEMAND
Labour is a derived demand - it is dependant on the demand for final goods
and services
e.g demand for builders - derived from the demand of houses
if demand for houses increases, demand for builders increases
LAW OF DIMINISHING MARGINAL RETURNS/PRODUCTIVITY
3.5 2
