Reading Labor Markets At Work Microeconomics As we have seen, the marginal product of labor could rise because of an increase in the use of other factors of production, an improvement in technology, or an increase in human capital. figure 12.9. changes in the demand for and supply of labor. panel (a) shows an increase in demand for labor; the wage rises to w2 and employment rises to l2. The supply curve shifts to s 2, pushing employment to l 2 and cutting the wage to w 2. for labor markets as a whole, such a supply increase could occur because of an increase in population or an increase in the amount of work people are willing to do. for individual labor markets, supply will increase as people move into a particular market.
Reading Labor Markets At Work Microeconomics 293 reading: labor markets at work labor markets at work. we have seen that a firm’s demand for labor depends on the marginal product of labor and the price of the good the firm produces. we add the demand curves of individual firms to obtain the market demand curve for labor. Chrome reader mode enter reader mode { }. If we assume that the employer sells its output in a perfectly competitive market, the value of each worker’s output will be the market price of the product. thus, demand for labor = mp l x p = marginal revenue product of labor (mrp) we show this in (figure), which is an expanded version of (figure) # of workers (l) 1. 2. Panel (a) of figure 6.16 “changes in the demand for and supply of labor” shows how an increase in the demand for labor affects wages and employment. the shift in demand to d2 pushes the wage to w2 and boosts employment to l2. such an increase implies that the marginal product of labor has increased, that the number of firms has risen, or.
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