Determinants of Labor Demand
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Burgers $5 Milkshake $3 Fries $2
Determinant of Labor Demand: Output Price
If I increase the price of my burgers to $7, my demand for labor will increase and I can hire more cooks!
Determinant of Labor Demand: Technological Change
These new check out belts increase my productivity and the value of my labor.
Determinant of Labor Demand: Supply of Other Factors
Supply of ladders and tires is low right now, which decreases my productivity and the value of my labor.
Since the demand curve represents value of the marginal product, and VMP is equal to marginal product times price, an increase in price results in an increase in labor demand.
Most of the time, technology helps workers produce more, resulting in greater marginal product and therefore increased VMP and demand for labor.
If the supply of other production inputs, like capital goods, decreases, the marginal product of labor will decrease, decreasing VMP and labor demand as well (or vice versa).
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