Wednesday, August 17, 2011
"The demand for labor curve's downward sloping bcoz the marginal product of labor's increasing" TRUE, FALSE ?
The demand for labor is effectively downward sloping but the marginal product of labor does not increase. This is absolutely false because a part of the definition that explains why LD curve is downward is from a decreased in MPL. Because of the specialization, when you hire your 1-2 or 3 first worker you see an increase in the Marginal product of labor because they become more efficient. Therefore MPL increases because the ratio change in Q over change in Labor has increased at the beginning. Therefore when you have your downward sloping LD curve you can see that on your left the slope is higher and they hire less. On the other hand, when you look at the slope on your right you see a totally smaller slope and a lot of labor. We can conclude that as the amount of labor increases MPL increases at the beginning and then go down. This is not even the same relationship then False. If you have any further question let me know!
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