The perfectly competitive firm’s demand for labor curve slopes downward because of diminishing marginal returns.
As more and more workers are hired, the average productivity per worker decreases.
This means that as a firm hires more employees.
It needs to increase wages in order to entice them to join the company.
This results in an upward sloping labor supply curve and a downward sloping demand for labor curve.
A reason why a perfectly competitive firm’s demand for labor curve slopes downwards is that diminishing marginal returns occur with hiring additional staff members.
As firms hire more staff they need to increase wages which causes their labor supply curves upwards .
While their downward slope on the left side will cause people not wanting work at a certain wage.
The average productivity per worker decreases which causes rising wages to entice them.
The downward sloping of this curve also means that there will be a greater shortage of labor at some point.
If production cannot keep up with the rate it is being produced or consumed.
Leading to higher prices.
Perfect Competition, a reason why a perfectly competitive firm’s demand for labor curves downwards is due to diminishing marginal returns occurring when hiring additional staff members.
As firms hire more employees they need to increase wages causing their labor supply curves upwards while.
