Overview
Marginal returns and labor supply are essential concepts in economics that help explain how businesses make hiring decisions and how wages are determined. Marginal returns refer to the additional output gained from hiring one more worker, while labor supply represents the total hours workers are wil...
Key Terms
Example: If hiring one more worker increases output from 10 to 15 units, the marginal product is 5.
Example: As wages increase, more workers are willing to work, shifting the labor supply curve to the right.
Example: Adding more workers to a fixed-size factory may initially increase output, but eventually, each new worker contributes less.
Example: If a worker earns $15 per hour, that is their wage rate.
Example: If 100 workers are willing to work at $20 per hour and employers need 100 workers at that wage, it is the equilibrium wage.
Example: The labor market can be affected by economic conditions, such as recessions or booms.