Chapter_3_Labor_Demand_Presentation_Notes.pptx

Labor Economics

1. Labor Demand Chapter 3 – Labor Economics Presented by: [Your Name / Institution]

2. Overview of Labor Demand Definition of labor demand Distinction from labor supply Derived nature of labor demand

3. The Firm’s Production Decision Inputs: Labor (L) and Capital (K) Short run: Capital fixed, labor variable Long run: All inputs variable

4. Marginal Product of Labor (MPL) Definition and formula Law of Diminishing Returns Example: MPL declines as labor increases

5. Value of Marginal Product (VMP) VMP = MPL × Price Decision rule: Hire where VMP = Wage Graphical illustration

6. Labor Demand Curve Downward sloping Movements vs. shifts in the curve

7. Shifts in Labor Demand Output price changes Technological change Changes in the quantity of other inputs

8. Short-Run vs Long-Run Labor Demand Short run: fixed capital Long run: substitution and scale effects

9. Substitution and Scale Effects Substitution: replace capital with labor or vice versa Scale: output level changes affect labor

10. Elasticity of Labor Demand Definition and determinants Factors: substitutability, labor cost share, elasticity of product demand

11. Applications and Policy Implications Minimum wage Payroll taxes Automation/technology impact

12. Labor Demand and Wage Rate Graphical representation of wage changes and employment Inverse relationship emphasized

13. Competitive vs. Monopsony Firms Competitive markets: wage takers Monopsony: firm sets wage Employment implications

14. Summary Key points recap Determinants, elasticity, policy relevance

15. Questions & Discussion How does labor demand respond to technology? What happens to labor demand if wages rise?