2. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain End Starter – Read article – List factors influencing S&D of labour

3. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain Objective – To know - What are the determinants of elasticity of demand for labour Learning objective: What is derived demand and MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP analysis of diagram-Explain Some - Who uses MRP - Explain

4. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain Past paper Q - June 2002 4. (a) Explain the factors which determine the marginal’s revenue product of labour [10] (b) Discuss the extent to which marginal revenue product is the crucial factor in explaining why top soccer players earn so much more than waiters and waitresses [15] REMEMBER Q’S ARE NOW Q 15 AND 20 MARKS!

5. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain Derived Demand The demand for labour is a derived demand. Firms only demand employees because of the demand for actual products. We only want you for your output Increase in output Increase in demand for labour

6. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain Marginal Revenue Product People are employed because of the value of their output. This depends on: – The extra output that each extra worker produces (Marginal Product /marginal physical product) MP – The extra revenue this extra worker generates when it is sold (Marginal Revenue) MR the value of the output produced by an extra worker is called the Marginal Revenue Product (MRP) MRP=MPxMR

7. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain Marginal Revenue Productivity Assumptions: Labour is the only variable factor of production Labour is homogeneous- labour cannot dictate price The labour market is perfectly competitive so no one employer can influence the wage rate The firm operates in a perfectly competitive product market DOES THIS EXIST IN REALITY?

8. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain MRP- Why does it slope?

9. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain The Demand for Labour – Why slope? The demand for labour is downward sloping due to the law of diminishing returns, which states: As successive units of a homogeneous variable factor of production are added to a fixed factor, the increments to total output will rise first and then eventually diminish, ceteris paribus.

10. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain 1.Get into two/three teams – You will be in charge of making burgers- 2.Nominate 1 person to cut shapes- no one can help them – the rest of you keep count of productivity 3.To make a burger you have to cut out from the template and then transport and stick up for sale using your blue tack onto the flip chart paper, starting at month 1. 4.You start when told and finish when told (2 mins)-only finished burgers counted

11. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain Number of workers Total output Marginal Product MP Marginal revenue MR Marginal Revenue Product MRP Total Revenue 1 2 3 4 5 6 Firm sells products for £2 Wage rate is constant at £10 1.Fill in Gaps 2.How many workers should they employ?

12. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain

13. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain

14. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain

15. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain

16. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain

17. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain

18. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain

19. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain 2 Minute Timer End 1.Nominate 1 person to cut shapes- no one can help them – the rest of you keep count of productivity 2.To make a burger you have to cut out from the template and then transport and stick up for sale using your blue tack onto the flip chart paper, starting at month 1. 3.You start when told and finish when told (2 mins)-only finished burgers counted

20. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain 2 Minute Timer End How did you get on? What fresources/factors are represented in the game so far?) 1.Total up your sheet then- 2.Nominate another person – 1 to cut and one to stick shapes no one can help them – the rest of you keep count of productivity 3.You start when told and finish when told (2 mins)-only finished burgers counted

21. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain 2 Minute Timer End How did you get on? Did you do better? What economic key terms were we proving 1.Total up your sheet then- 2.Nominate another person (3 now) – 1 to cut and one to stick shapes no one can help them – the rest of you keep count of productivity 3.You start when told and finish when told (2 mins)-only finished burgers counted

22. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain 2 Minute Timer End How did you get on? Did you do better? Total up your sheet then- 1.Nominate another person (4 now) – 1 to cut and one to stick shapes no one can help them – the rest of you keep count of productivity 2.You start when told and finish when told (2 mins)-only finished burgers counted

23. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain MRP on Diagram Task How much labour to employ? Draw your data into a graph showing your results Then COMMENT on the diagram using economic terms. Wage Rate MRP MCL W Quantity of Labour Q1Q2Q3Q4

24. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain Equilibrium Level of employment Profit maximising level of employment occurs where MCf = MRP MC L = Supply of Labour MRP = MPP x P = Demand for Labour

25. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain Problems with MRP (Marginal Revenue Productivity Theory How do we measure the productivity of workers in the service sector, eg teacher, supermarket cashier, nurse, secretary? Is there a price that can be put on all workers’ output? MRP theory requires us to assume we can measure the output of each worker. In reality job evaluation is required to set performance targets

26. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain But in reality…. MRP is difficult to measure as difficult to isolate: Individuals contribution when working in a team Contribution made by labour & Capital Difficult to measure the Marginal Product of some workers in the tertiary sector e.g. surgeons 5 hip replacements vrs 1 heart/lung transplant

27. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain Problems with Marginal Revenue Productivity Theory Knowledge of the MRP curve will let us work out how many workers will be employed but doesn’t tell us how the wage rate is determined. Wage levels depend upon the interaction of demand and supply of labour ONLY WORKS IN PERFECT COMP – I.E. A MODEL!

28. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain Demand Curve for Labour DL1 DL2 What might cause the demand for labour to shift from DL1 to DL2? 1.Increase in Productivity 2.Increase in demand for the product 3.Increase in the price of the product 4.Increase in the price of capital

29. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain Task 1 - complete exercise 7.1 on Labour market equilibrium – (2 minutes) (Draw diagram showing analysis of the effects on labour market equilibrium if there is a fall in selling price of a firms product Then - “What does it depend on?”

30. Learning objective: Demand for labour what is MRP? Outcomes – All – Definition of derived demand and MRP, Diagram for MRP Most - analysis of diagram-Explain results of experiment Some - Who uses MRP? - Explain Plenary Who uses MRP? What are the factors discussed today? What is most important and WHY?