Labour Demand: The Basic Model

Labour demand is defined as the amount of labour that employers seek to hire during a given time period at a particular wage rate. The demand for labour as a factor of production is a derived demand , in that labour is demanded not for its own sake but for its contribution to the production of goods and services. In this chapter we examine the theory of labour demand, which is an application of the marginal productivity theory to the particular factor of production labour. 1 In Chapter 7 we consider the interaction of demand and supply forces in the determination of the price of labour (that is, the wage rate ).