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Which of the following statements are correct? I. The demand for labor is referred to as a ""derived demand."" II. Changes in the productivity of labor will affect the demand for that labor. III. Changes in the price of the product that labor creates will change the demand for that type of labor. IV. The marginal revenue product curve for labor really is the demand curve for labor. Only Statement I is correct. Only statements I and III are correct. Only Statements II and IV are correct. Only Statements II and III are correct. All statements are correct.

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Answer:

All statements are correct.

  • I. The demand for labor is referred to as a "derived demand."
  • II. Changes in the productivity of labor will affect the demand for that labor.
  • III. Changes in the price of the product that labor creates will change the demand for that type of labor.
  • IV. The marginal revenue product curve for labor really is the demand curve for labor.

Explanation:

Derived demand refers to a demand for some production factor that results from the demand of another product or service. The demand for labor results from the demand for the products or services that the company sells. If the company sells more products or services, its demand for labor should increase.

The higher the productivity of labor, less quantity of labor will be demanded. For example, automation increases labor productivity (higher total output with less labor) but also decreases the total number of workers.

If the price of a product or service decreases, the quantity supplied will also decrease, decreasing the demand for labor. If the price increases, the opposite will happen.

The marginal revenue product curve should equal the demand curve for labor in order to maximize profits.

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