The Labor Market
As we know that the firm will hire only optimal amount of labor that will maximize profit, this optimal quantity of labor depends upon the marginal product of labor(MPL). The marginal product of labor is defined as the extra unit of output that the firm produces from hiring one extra unit of labor.
MPL=F(K,L+1)-F(K,L)The above equation states that Marginal Product of labor is the difference of output produced from one extra unit of labor and the output produced from original quantity of labor.This production function has the function of diminishing marginal product which means that the marginal product of labor decreases as the amount of labor increases,and as the amount of labor increases the production function becomes flatter i.e. diminishing marginal product.
Read more about this topic: Factor Payments (economics)
Famous quotes containing the words labor and/or market:
“It is essential that there should be organization of labor. This is an era of organization. Capital organizes and therefore labor must organize.”
—Theodore Roosevelt (1858–1919)
“The market came with the dawn of civilization and it is not an invention of capitalism.... If it leads to improving the well-being of the people there is no contradiction with socialism.”
—Mikhail Gorbachev (b. 1931)