there is an increase in the wage and per unit capital cost remain unchanged what will be the change in the optimal quantity
Answers
Explanation:
Conditions of Equilibrium
Equilibrium in the labor market requires that the marginal revenue product of labor is equal to the wage rate, and that MPL/PL=MPK/PK.
The labor market differs somewhat from the market for goods and services because labor demand is a derived demand; labor is not desired for its own sake but rather because it aids in producing output. Firms determine their demand for labor through a lens of profit maximization, ultimately seeking to produce the optimum level of output and the lowest possible cost.
The Wage Rate
The wage rate is determined by the intersection of supply of and demand for labor.The marginal benefit of hiring an additional unit of labor is called the marginal product of labor: it is the additional revenue generated from the last unit of labor. In theory, as with other inputs to production, firms will hire workers until the wage rate (marginal cost) equals the marginal revenue product of labor (marginal benefit).
Changes in Supply and Demand
In competitive markets, the demand curve for labor is the same as the marginal revenue curve. Thus, shifts in the demand for labor are a function of changes in the marginal product of labor. This can occur for a number of reasons. First of all, you can imagine that a new product or company is created that represents new demand for labor of a certain type. There are also three main factors that would shift the labor demand curve:
Technology which affects the output of a unit of labor.
Changes in the price of the output which affect the value of the unit of labor.
Changes in the price of labor relative to other factors of production.
In the long run, the supply of labor is a function of the population. A decrease in the supply of labor will typically cause an increase in the wage rate. The fact that a reduction in supply tends to strengthen wages explains why unions and other professional associations have often sought to limit the number of workers in their particular industry. Physicians, for example, have a financial incentive to enforce rigorous training, licensing, and certification requirements in order to limit the number of practitioners and keep the labor supply low.
Wage Rate in the Long Run: In the long run the supply of labor is fixed and demand is downward-sloping. The wage rate is determined by their intersection.
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Answer:
Hey mate
Explanation:
Optimal quantity will decrease