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(Solved): 1. Explain why the labor demand schedule has a negative slope, when drawn against the wagerate.Note: ...



1. Explain why the labor demand schedule has a negative slope, when drawn against the wage

rate.

Note: Saying that as the wage rate falls, demand for labor increases is not an explanation, it

just a description of the negative slope.



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Answer:

The labor demand schedule has a negative slope due to the operation of the law of diminishing marginal productivity and the profit-maximizing behavior of firms.

The law of diminishing marginal productivity states that as more units of a variable input, such as labor, are added while other inputs are held constant, the additional output or productivity gained from each additional unit of the variable input will eventually decrease. In the context of labor, this means that the marginal product of labor declines as more workers are employed.



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