How does an increase in labor costs affect the labor demand curve, considering the concept of marginal product in a competitive market?

When labor costs increase, it becomes more expensive for companies to hire workers. In a competitive market, businesses want to maximize their profits, so they look at the marginal product of labor, which is the extra output produced by one more worker. If hiring an additional worker costs more than the value of the output they produce, companies will demand fewer workers. For example, if a factory finds that paying a new worker leads to only a small increase in production that doesn’t cover their wages, the factory might reduce the number of workers they hire. Therefore, the labor demand curve shifts to the left, showing that at higher labor costs, companies are willing to employ fewer workers.