Answer to Question #224495 in Microeconomics for Sarthak

Question

The market demand for labor represents

1.The vertical summation of individual firms’ demand for labor

2.The horizontal summation of individual firms’ demand for labor

3.The number of firms that already hire workers

4.The average firm’s demand for labor

5.None of the above

Answer 1

Solution:

The correct answer is 2. The horizontal summation of individual firms’ demand for labor.

 

The market demand for labor shows the quantity of labor employers wish to hire at any given wage rate. Any change in the wage rate will result in a change in the quantity demanded for labor. That is, if the wage rate increases, employers will want to hire fewer employees and when the wage decreases, they will want to hire more employees. Therefore, the demand for the labor curve is downward sloping.