The labor demand curve slopes down because
A)fewer workers work at low wages.
B)capital will substitute for labor as wages decrease.
C)of the diminishing marginal product of labor.
D)of the income effect of rising wages.

Question

Quizplus · Accepted Answer

The labor demand curve slopes down because of the diminishing marginal product of labor. This means that as more workers are hired, the additional output produced by each additional worker decreases. Therefore, firms are willing to hire fewer workers at higher wages because the additional output produced by each worker justifies the higher wage. Option A is incorrect because it only explains the labor supply curve. Option B is partially correct but does not provide the full explanation for why the labor demand curve slopes down. Option D is incorrect because it refers to the income effect, which is a factor affecting the labor supply curve, not the labor demand curve.

The Labor Demand Curve Slopes Down Because