Question

Which of the following statements is correct?

• A. The demand for labour is made by the producer
• B. The demand for labour depends upon its productivity
• C. The marginal productivity of labour is its maximum wage
• D. All of these

Hint:

The demand for labor is based on its productivity, and in a competitive market, the wage a worker receives is generally equal to their marginal productivity.

Answer 1

The Correct Option is D

Step 1: Understanding the Demand for Labour:
In economics, the demand for labor is derived from the demand for goods and services. Producers hire labor to produce goods and services that they can sell in the market.
Step 2: Analysis of Each Option:
- The demand for labour is made by the producer: This statement is correct because producers (employers) create demand for labor based on the need for workers to produce goods and services.
- The demand for labour depends upon its productivity: This is also correct. If labor is more productive, it adds more value to the production process, making it more valuable to the producer. The higher the productivity, the higher the demand for labor.
- The marginal productivity of labour is its maximum wage: This statement is correct because in a competitive labor market, the wage paid to a worker is generally equal to the marginal productivity of that worker. In other words, a worker’s wage is determined by the additional value the worker contributes to production. Step 3: Conclusion:
All the statements are correct. Therefore, the correct answer is (D) All of these.