Social Sciences and History / Unit 14 SSH 1301 short lesson, about 20 seconds
Labor Demand From the Marginal Product
Captions available
The idea
A firm demands labor for the value of its marginal productivity: in a competitive output market the value of the marginal product, marginal product times price; otherwise the marginal revenue product, marginal product times marginal revenue. Hire until wage equals labor demand.
In practice
First rule: never pay above marginal productivity.
Where people slip
Supply and demand set the competitive wage.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Something wrong in this lesson? Flag it