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Briefly outline the theory of marginal revenue productivity and then examine the criticisms of the theory?
Workers are needed for the output they are required to produce. We say that labour as a factor input is a derived demand. When firms see increasing demand for their products, they will need to employ extra workers and thus the demand for labour increases. Demand for labour and the market wage rate There is normally an inverse relationship between the demand for labour and the wage rate that the firm will have to pay for each additional worker. If wages are high, it is more costly to hire extra employees. When wages are lower, labour becomes cheaper than using capital equipment and it becomes more attractive and affordable for the business to take on more employees. Remember that firms are aiming to maximise profits. They will use the factor of production (labour or capital) that does the job as efficiently as possible for the lowest possible cost. Marginal Revenue Product Marginal revenue productivity (MRP) is a theory of wages where workers are paid the value of their marginal revenue product to the firm. MRP theory suggests that wage differentials result from differences in labour productivity and the value of the output that the labour input produces MRP theory is based on a competitive labour market and the theory rests on a number of key assumptions that are unlikely to exist in the real world. (In reality, most labour markets are imperfect, one of the reasons for earnings differentials between occupations) * Workers are homogeneous * Firms have no buying power when demanding workers * There are no trade unions * The productivity of each worker can be clearly measured * The supply of labour is perfectly elastic. Workers are occupationally and geographically mobile and can be hired at a constant wage rate Marginal Revenue Product (MRP) measures the change in total revenue for a firm as a result of selling the output produced by an extra worker. MRP = Marginal Physical Product x Price of Output per unit ILLUSTRATING THE LABOUR DEMAND CURVE In the left hand diagram, when there is a fall in the wage rate from W1 to W2, the firm will expand employment from E1 to E2. This is because the labour input has become relatively cheaper for a given level of productivity, compared to other inputs. A rise in the wage rate from W1 to W3 causes a contraction of labour demand. Shifts in the marginal revenue product of labour Marginal revenue productivity of labour will increase when there is (a) an increase in labour productivity and/or (b) an increase in demand for the firm's output which causes higher prices and raises the value of output produced by the workforce. The right hand diagram shows how this causes an outward shift in the labour demand curve. For a given wage rate W1, a profit maximising firm will employ more workers. Total employment in the market will rise. Problems with marginal revenue productivity theory Marginal revenue productivity cannot be used as a valid basis for discussing labour demand for all types of workers. In many cases it is hard to objectively measure productivity because no physical output is produced by the workforce. Even if productivity can be measured, the output produced may not be sold at a market price. This makes it hard to place an exact valuation on the output of each extra worker. In other examples, wages may be set independently of the state of labour demand. Public sector workers may have their pay set directly by government. Marginal revenue product is useful in explaining the demand for labour in many occupations. But for a fuller explanation of wage determination and the existence and persistence of wage differentials, we must focus more on the supply side of individual labour markets.
What factors determine the demand for labor?
causes a movement along the MRP curve: -wage rate causes a shift of the MRP curve: -price of capital -changes in productivity -changes in the price of the firm's product -demand for the product
What determines wages in The Theory of Negotiated Wages?
Basic economic theory suggests that wages depend on a workers marginal revenue Product MRP. (this is basically the value that they add to the firm who employs them MRP is determined by two factors MPP - Marginal physical product - the productivity of a worker MR - Marginal Revenue of last good sold - Effectively the price and demand for the good that the worker produces. Another factor that determines pay, is the demand for the good. For example, the best football players get paid much more than the best hockey players because there is much more demand for watching football games, there is more money in the sport so clubs are willing and able to pay much higher salaries to get the service of the best players. As well as demand, pay will be determined by supply. Workers who have specialist skills will generally be awarded with higher pay. You could say if someone spends 5 years to be trained as an accountant, they deserve higher pay to reimburse them for the investment of time in becoming skilled.
What is the full form of MRP PRISE?
Maximum Retail Price
A firm will only employ additional workers to which point?
to the point where MRP=MC
What does mrp stand for?
MRP is an abbreviation used for many different things. Some things include manufacturing resource planning, marginal revenue product, material requirements planning, and maximum retail price.
Briefly outline the theory of marginal revenue productivity and then examine the criticisms of the theory?
Workers are needed for the output they are required to produce. We say that labour as a factor input is a derived demand. When firms see increasing demand for their products, they will need to employ extra workers and thus the demand for labour increases. Demand for labour and the market wage rate There is normally an inverse relationship between the demand for labour and the wage rate that the firm will have to pay for each additional worker. If wages are high, it is more costly to hire extra employees. When wages are lower, labour becomes cheaper than using capital equipment and it becomes more attractive and affordable for the business to take on more employees. Remember that firms are aiming to maximise profits. They will use the factor of production (labour or capital) that does the job as efficiently as possible for the lowest possible cost. Marginal Revenue Product Marginal revenue productivity (MRP) is a theory of wages where workers are paid the value of their marginal revenue product to the firm. MRP theory suggests that wage differentials result from differences in labour productivity and the value of the output that the labour input produces MRP theory is based on a competitive labour market and the theory rests on a number of key assumptions that are unlikely to exist in the real world. (In reality, most labour markets are imperfect, one of the reasons for earnings differentials between occupations) * Workers are homogeneous * Firms have no buying power when demanding workers * There are no trade unions * The productivity of each worker can be clearly measured * The supply of labour is perfectly elastic. Workers are occupationally and geographically mobile and can be hired at a constant wage rate Marginal Revenue Product (MRP) measures the change in total revenue for a firm as a result of selling the output produced by an extra worker. MRP = Marginal Physical Product x Price of Output per unit ILLUSTRATING THE LABOUR DEMAND CURVE In the left hand diagram, when there is a fall in the wage rate from W1 to W2, the firm will expand employment from E1 to E2. This is because the labour input has become relatively cheaper for a given level of productivity, compared to other inputs. A rise in the wage rate from W1 to W3 causes a contraction of labour demand. Shifts in the marginal revenue product of labour Marginal revenue productivity of labour will increase when there is (a) an increase in labour productivity and/or (b) an increase in demand for the firm's output which causes higher prices and raises the value of output produced by the workforce. The right hand diagram shows how this causes an outward shift in the labour demand curve. For a given wage rate W1, a profit maximising firm will employ more workers. Total employment in the market will rise. Problems with marginal revenue productivity theory Marginal revenue productivity cannot be used as a valid basis for discussing labour demand for all types of workers. In many cases it is hard to objectively measure productivity because no physical output is produced by the workforce. Even if productivity can be measured, the output produced may not be sold at a market price. This makes it hard to place an exact valuation on the output of each extra worker. In other examples, wages may be set independently of the state of labour demand. Public sector workers may have their pay set directly by government. Marginal revenue product is useful in explaining the demand for labour in many occupations. But for a fuller explanation of wage determination and the existence and persistence of wage differentials, we must focus more on the supply side of individual labour markets.
What is MRP?
MRP is the "manufacturer's recommended price." that si what the manufacturer thinks the product should sell for on the retail market.
What is the mrp?
MRP is the "manufacturer's recommended price." that si what the manufacturer thinks the product should sell for on the retail market.
What determines the demand for labors?
causes a movement along the MRP curve: -wage rate causes a shift of the MRP curve: -price of capital -changes in productivity -changes in the price of the firm's product -demand for the product
What factors determine the demand for labor?
causes a movement along the MRP curve: -wage rate causes a shift of the MRP curve: -price of capital -changes in productivity -changes in the price of the firm's product -demand for the product
What determines wages in The Theory of Negotiated Wages?
Basic economic theory suggests that wages depend on a workers marginal revenue Product MRP. (this is basically the value that they add to the firm who employs them MRP is determined by two factors MPP - Marginal physical product - the productivity of a worker MR - Marginal Revenue of last good sold - Effectively the price and demand for the good that the worker produces. Another factor that determines pay, is the demand for the good. For example, the best football players get paid much more than the best hockey players because there is much more demand for watching football games, there is more money in the sport so clubs are willing and able to pay much higher salaries to get the service of the best players. As well as demand, pay will be determined by supply. Workers who have specialist skills will generally be awarded with higher pay. You could say if someone spends 5 years to be trained as an accountant, they deserve higher pay to reimburse them for the investment of time in becoming skilled.
Is octroi is included in MRP?
No, MRP includes Excise & VAT only as the Octori is charged on MRP so how it can be included in it?
What is difference between sap and mrp systems in manufacturing?
what is an mrp system in manufactruring
What is the difference between EOQ and MRP?
apa perbedaan antara EOQ DAN MRP
Why labelling important to customers?
Labelling is important to find the quality of the product. It provides the complete details like manufacturing date, MRP rate, ingredients compostion etc.
What is a mrp system used for?
An MRP or Material Requirements Planning system is system that is used for inventory control and production planning. This is used in the manufacturing process and most of these systems are software based. MRP can also be conducted by hand.
