Labour Demand and Supply

• The marginal physical product of labour is the extra output generated when an additional worker is employed.
• The marginal revenue product is the extra revenue generated when an additional worker is employed.
• The demand for labour is a derived demand, based on the output it produces.
• The marginal revenue product curve represents the demand for labour.
• The demand for labour can shift due to changes in marginal physical product or marginal revenue.
• The price of the product being sold affects the marginal revenue product and can shift the demand for labour curve.
• Wage elasticity of demand for labour is influenced by availability of substitutes, labour cost as a proportion of total costs, and price elasticity of demand for the product.
• The supply of labour is affected by the wage rate and changes in wage rates in alternative occupations.
• Bonuses and opportunities for overtime can increase the supply of labor and shift the supply curve to the right.
• Non-monetary factors such as training requirements, labor immobility, job satisfaction, working conditions, and opportunity cost can also impact the supply of labor and shift the supply curve either to the left or right.

The video discusses the concept of labor demand and supply, emphasizing that the labor market operates similarly to other markets. The wage for labor is determined by the forces of supply and demand. The marginal productivity theory is introduced, explaining that the extra output generated by employing an additional worker is crucial in deciding whether to hire them. The marginal revenue product (MRP) is calculated by multiplying the marginal physical product (MPP) with the marginal revenue. The demand for labor is derived from the firms employing workers, who are primarily interested in the additional revenue these workers can bring. The MRP curve represents the demand curve for labor and is downward sloping due to the law of diminishing marginal returns. Changes in the MRP curve can occur if there are shifts in the conditions affecting the marginal revenue product. Factors such as changes in productivity or the price of the product being sold can cause the MRP curve to shift. The video also discusses wage elasticity of demand for labor, which is influenced by factors such as the availability of substitutes, the proportion of labor costs to total costs, and the price elasticity of demand for the product being produced. The supply of labor is determined by the number of hours workers are willing and able to work at a given wage rate. Monetary influences, particularly the wage rate offered in a specific occupation or industry, play a significant role in determining labor supply. Changes in the wage rate in alternative occupations can also impact labor supply. These factors can cause the supply curve for labor to shift either to the right or left.