Question

Explain the demand curve for labor as it coincides with the Marginal Revenue of Labor.

Please use Microeconomics concepts to explain it.

Answer 1

Answer - The demand curve for labor is the downward sloping curve which shows the inverse relationship between the units of labor and the wage rate.

The marginal revenue of labor is the value of the last unit produced by the labor multiplied by the price. The equilibrium in the labor market or the demand for the labor is determined at the point where the Marginal Revenue Product of labor is equal to the Wage rate. This shows that the profit is maximised and cost is minimised . This is the most efficienct level of labor demand.