chapter03

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Chapter 3

The Demand for Labor

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Table 3.1: The Marginal Product of Labor in a Hypothetical Car Dealership

(capital held Constant)


Figure 3.1: Demand for Labor in the Short Run (Real Wage)


Table 3.2: Hypothetical Schedule of Marginal Revenue Productivity of

Labor for Store Detectives


Figure 3.2: Demand for Labor in the Short Run (Money Wages)


Figure 3.3: Effect of Increase in the Price of One Input (k) on Demand for Another Input (j),

where Inputs Are Substitutes in Production


Figure 3.4: The Market Demand Curve and Effects of an Employer-Financed

Payroll Tax


Figure 3.5: Payroll Tax with a Vertical Supply Curve

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Appendix 3A

Graphical Derivation of a Firm’s Labor Demand Curve


Figure 3A.1: A Production Function


Figure 3A.2: The Declining Marginal Productivity of Labor


Figure 3A.3: Cost Minimization in the Production of Q*

(Wage = $10 per Hour; Price of a Unit of Capital = $20)


Figure 3A.4: Cost Minimization in the Production of Q*

(Wage = $20 per Hour; Price of a Unit of Capital = $20)


Figure 3A.5: The Substitution and Scale Effects of a Wage Increase

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