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• Outline Step by Step the Derivation of the Short

question 20

Essay

• Outline step by step the derivation of the short run labour demand curve. Do not confuse this wit the model for long run labour demand involving isoquants and the isocost curves. You do not have t give a graph. The first step is a description of the behavioural assumption. Restrict your analysis to a intuitive but methodical discussion. Include in your analysis an explanation of why it is called the derived demand for labour.
• Explain the different implications for labour demand between the case in which the output marke is monopolized and the case in which it is perfectly competitive.
• Hicks' laws refer to the factors which affect the elasticity of labour demand. Explain the role of each of the following variables, and provide an explanation:
a) the availability of substitute inputs
b) the elasticity of demand for output
c) the ratio of labour cost to total cost.


Definitions:

Perfect Competitor

an individual firm operating in a perfect competition market structure, which cannot influence the market price and produces a standard product.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded by consumers, typically sloping downward from left to right.

Marginal Revenue

The additional revenue that is generated by selling one more unit of a product or service.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the total quantity of output produced.

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