Question

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the demand for labor resource will increase, meaning the demand curve will shift rightward, when

□ the price of a complementary input decreases
□ the price of a substitute input decreases, provided the output effect exceeds the substitution effect
□ the productivity or marginal productivity of labor stays constant
□ the productivity or marginal productivity of labor increases
□ the price of a substitute input increases, provided the substitution effect exceeds the output effect
□ the demand for the product produced by that labor increases

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Explanation:

• Complementary input price decrease: When the price of a complementary input (e.g., if labor and machinery are complementary, and machinery price drops), more of both (machinery and labor) will be used. So demand for labor increases.
• Substitute input price decrease (output effect > substitution effect): The output effect (due to lower cost, more output is produced, requiring more labor) dominates the substitution effect (substituting substitute input for labor). So net effect is more labor demand.
• Labor productivity increase: More productive labor is more valuable. Firms will demand more of it as it can produce more output per unit of labor, increasing marginal revenue product of labor.
• Product demand increase: If the product that labor produces is in higher demand, firms will produce more of that product. To produce more, they need more labor (derived demand), so labor demand increases.

• Constant productivity: No change in productivity means no reason for firms to change labor demand based on productivity - related factors.
• Substitute input price increase (substitution effect > output effect): Substitution effect (substituting labor for substitute input) dominates output effect (output may decrease as cost rises if substitution is costly). Net effect is less labor demand.

Answer:

• the price of a complementary input decreases
• the price of a substitute input decreases, provided the output effect exceeds the substitution effect
• the productivity or marginal productivity of labor increases
• the demand for the product produced by that labor increases