Labor Demand
Definition
Labor demand refers to the quantity of labor that employers are willing and able to hire at different wage rates in a given market. It is determined by factors such as the productivity of labor, the price of output, and the availability of other inputs.
Analogy
Think of labor demand as a restaurant owner deciding how many chefs to hire based on how busy their restaurant is. When there are more customers (higher demand for food), they will need to hire more chefs (increase labor demand) to keep up with the orders.
Related terms
Wage Rate: The amount of money paid per unit of time (usually per hour) for labor services.
Marginal Productivity: The additional output produced by each additional unit of input (labor).
Substitution Effect: When employers respond to an increase in wages by substituting capital or technology for labor, resulting in a decrease in labor demand.
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