Changes in Demand for Labor

The movement along a labor demand curve implied by the concept of elasticity is quite distinct from an increase or decrease in labor demand. The latter imply shifts of the demand for labor curve either rightward or leftward. What factors will cause such shifts? The major determinations of labor demand productivity the number of employees and the prices of other sources. 1. Product Demand: A change in the demand for the product that a particular type of labor is producing all else being equal will shift the labor demand curve in the same direction. if we plotted the new MRP data we should that demand for labor curve shifted rightward.. A decline in the demand for the product would likewise shift the labor demand curve leftward. 2. Productivity: Assuming that it does not cause a fully offsetting change in product price ,a change in the marginal product of labor (MP)will shift the labor demand curve in same direction. More concretely let us assume that the total product produced by each worker in the combination of fixed capital double. Clearly Mp in column 3 and consequently MRP in column 6 would increase .if the new MRP data were plotted we would observe that the labor demand shifted rightward. Conversely ad decline in productivity would shift the labor demand curve leftward. 3. Number of Employees: Recall the market demand for labor in figure 5-5 was found summing horizontally the price-adjusted Labor demand curve possessed curve by individual employees. assuming no change by other firms .a change in number of firms employing a particular type of labor will change the demand for labor in same direction. 4. Prices of the other resources :Changes in the prices of other inputs such as capital land and raw materials can shift the demand curve for labor. To illustrate the ,we focus solely on changes in the price of capital .Our initial assumption is that labor and capital are substitutes in production Which means that a given a quantity of output can be produced with much capital and little labor or much labor and little capital. Now suppose that the price of capital falls. our task is to determine the impact of this price decline on the demand for labor. 5. Gross substitutes: If labor and capital are gross substitutes, the decline in the price of capital will result in a decrease in the demand for labor. Gross substitutes are inputs such that when the price of one changes, the demand for the other change in the same direction. This correctly impels that in this case the substitution effect outweighs the output effect. The decline in the price of capital lowers the marginal cost of producing the output which taken alone would result in an expansion of output and an increase in the demand for labor(The output effect).But the lower priced capital is substituted for labor, Which taken alone would reduce the demand for labor. In situations where labor and capital are gross substitutes, the latter substitution effect swamps the output effect and labor demand falls. Example: The decline in the price of security demand for night guards. #by Aktaruzzaman,23rd Batch/BIHRM

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Summary:
Now a days demand of is labor changing. The demand curve of labor is shifts labor curve either rightward or leftward. In past it was elastic. There are several reasons are over there. Types of labor demand are changing. Product Demand: A change in the demand for the product that selected types of labor are producing all else being equal will shift the labor demand curve in the same direction. If we can implement the new MRP data we should that demand for labor curve shifted rightward. Same decline in the demand for the product would likewise shift the labor demand curve leftward. Productivity: It does not because a fully offsetting change in product price, a change in the marginal product of labor (MP) will shift the labor demand curve in same direction. Let us assume that the total product produced by each worker in the combination of fixed capital double. Clearly Mp in column 3 and consequently MRP in column 6 would increase .if the new MRP data were plotted we would observe that the labor demand shifted rightward. Conversely ad decline in productivity would shift the labor demand curve leftward. Number of Employees: In the market demand for labor in figure 5-5 was found summing horizontally the price-adjusted Labor demand curve possessed curve by individual employees. Assuming no change by other firms .a change in number of firms employing a particular type of labor will change the demand for labor in same direction. Prices of the other resources: Changes in the prices of other inputs such as capital land and raw materials can shift the demand curve for labor. We focus on changes in the price of capital .Our assumption is that labor and capital are substitutes in production which means that a given a quantity of output can be produced with much capital and little labor or much labor and little capital. Now suppose that the price of capital falls. Our main task is to determine the impact of this price decline on the demand for labor. Gross substitutes: If labor and capital are gross substitutes, the decline in the price of capital will result in a decrease in the demand for labor. Gross substitutes are inputs such that when the price of one changes, the demand for the other change in the same direction. Lower priced capital is substituted for labor, which taken alone would reduce the demand for labor. In situations where labor and capital are gross substitutes, the latter substitution effect change the output effect and labor demand falls.