When drawn against the current real wage, the labour demand curve is
A)upward sloping because the marginal product of labour rises with the quantity of labour employed.
B)downward sloping because the marginal product of labour declines with the quantity of labour employed.
C)upward sloping because the marginal product of labour declines with the quantity of labour employed.
D)downward sloping because the marginal product of labour is constant.
E)downward sloping because the marginal product of labour rises with the quantity of labour employed.

Question

Quizplus · Accepted Answer

The labour demand curve is derived from the marginal product of labour (MPL) curve. As more workers are hired, the MPL declines due to diminishing returns. Therefore, the labour demand curve is downward sloping because firms are willing to hire fewer workers at higher wages (to maintain profitability) and more workers at lower wages (to maximize output).

When Drawn Against the Current Real Wage, the Labour Demand