If firms are competitive and profit maximizing the demand cu

If firms are competitive and profit maximizing, the demand curve for labor is determined by

Solution

The hiring of the labour does not depend upon the profits of the firm and it is based on the value of marginal product of the labour. The value of the maginal product of the is found by wage multiplied by the marginal product of the labour. The firms hire up to the point where the wage equals the value of the marginal product of the labour.

ANS: The value of the marginal product of the labour.

The demand curve for the capital is also found out by the same manner.