1. Derivation of labor demand in a competitive product and labor market

2. Model of the competitive labor market
Wage and employment is determined at the levels (w* and n*) where quantity demanded of labor = quantity supplied.
We want to explain why the labor demand curve nd is downward sloping.
In other words, why does the number of workers hired by firms rises as the wage w goes down (wn )?

3. A concave well-behaved production function
Graph of concave production function:
Note: capital is fixed here, so we are in the short run!

4. Definition of isoprofit curve

5. An isoprofit curve

6. The Shape of the isoprofit curve

7. The closer an isoprofit curve is to the n-axis the larger are profits

8. Derivation of labor demand curve using isoprofit curves (1)

9. Derivation of labor demand curve using isoprofit curves (2)