Principles of Microeconomics / Unit 17 MIC 1633 short lesson, about 20 seconds
Derived Demand and the Hiring Rule
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The idea
A firm's demand for labor is derived from its product's demand: marginal revenue product, marginal product times marginal revenue. It hires until marginal revenue product equals marginal factor cost; that curve's falling part is its demand.
In practice
More airplane orders raise assembly wages through the price.
Where people slip
A wage change moves along that demand; product price, technology and the number of firms shift it.
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