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The long-run labor demand function of a competitive firm is determined by the following profit maximization problem: ,, = (,), where p is the exogenous selling price of the produced output, Q is the chosen quantity of output to be produced per month, w is the hourly wage rate paid to a worker, L is the number of labor hours hired (the quantity of labor demanded) per month, r is the cost of ...
The average product of labor (APL) is the total product of labor divided by the number of units of labor employed, or Q/L. [2] The average product of labor is a common measure of labor productivity. [4] [5] The AP L curve is shaped like an inverted “u”. At low production levels the AP L tends to increase as additional labor is added.
If the elasticity is higher than 1, then the supply of labor is "elastic", meaning that a small change in wages causes a large change in labor supply. If the elasticity is less than 1, then the supply of labor is "inelastic". Generally, the elasticity of labor supply varies by occupation and the time frame being considered. [1]
A conditional factor demand function expresses the conditional factor demand as a function of the output level and the input costs. [1] The conditional portion of this phrase refers to the fact that this function is conditional on a given level of output, so output is one argument of the function.
Elasticity of substitution is the ratio of percentage change in capital-labour ratio with the percentage change in Marginal Rate of Technical Substitution. [1] In a competitive market, it measures the percentage change in the two inputs used in response to a percentage change in their prices. [2]
From a Marxist perspective, a labour supply is a core requirement in a capitalist society.To avoid labour shortage and ensure a labour supply, a large portion of the population must not possess sources of self-provisioning, which would let them be independent—and they must instead, to survive, be compelled to sell their labour for a subsistence wage.
The equation below (in Cobb–Douglas form) is often used to represent total output (Y) as a function of total-factor productivity (A), capital input (K), labour input (L), and the two inputs' respective shares of output (α and β are the share of contribution for K and L respectively).
Wire-grid Cobb–Douglas production surface with isoquants A two-input Cobb–Douglas production function with isoquants. In economics and econometrics, the Cobb–Douglas production function is a particular functional form of the production function, widely used to represent the technological relationship between the amounts of two or more inputs (particularly physical capital and labor) and ...