Demand and Supply for Labour

Labor Demand
Demand for labor will increase if:

• The price of the output increase
• The price of a factor of production that is substitute to labor increase
• The price of a factor of production that is complement to labor decrease

Demand of labor is more elastic in long run. A firm when continue to hire labor until MRP of labour = Price of labour.

Factors that shift demand curve
Change in:

• Demand for the goods
• Productivity of the resource
• Price of related resources

Labor Supply

• Supply curve: depend of the working-aged population
• Quantity of labor supplied : depend on the wage rates
  
  Increase in wage rates => consume less leisure => substitution effect
  Increase in wage rates => more income to consume leisure => income effect