MPP and MRP - for labor since labor is a productive...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
MPP and MRP: Just as demand and supply forces together determine prices and quantities of goods exchanged in the product market similar rules operate in the factor market . If the labor market is assumed to be competitive then the rate of wages will be fixed and uniform. At such a competitive wage rate a firm has to decide how many workers it can profitably employ. In other words, a firm has to determine its own demand for labor. The productive contribution of an additional or marginal worker governs such a demand
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: for labor since labor is a productive service. A firm is guided in this respect by the marginal productivity rule . The most important principle determining demand for labor is called Marginal Productivity Theory . It attempts to relate marginal contribution to the output produced and the rate of wages required to be paid to the marginal worker. Wages are paid in cash or money units while the product is measured in physical units....
View Full Document

This note was uploaded on 11/26/2011 for the course ECON MICRO ec 201 taught by Professor - during the Fall '10 term at Montgomery.

Ask a homework question - tutors are online