Labor Economics

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Labour intensity mode of production Process where the ratio of labour to other inputs is relatively large. Where alternative techniques of production are possible , labour intensity mode can be varied in response to changes in the relation between real wages and the cost of using other inputs. A mode of production referrers to the way production is carried out. Labour refers to the physical efforts or people are required to carry out a process of production. Therefore a labour intensive mode of production where more labour is employed than capital. Theory of value (economics):" Theory of value " is a generic term which encompasses all the theories within economics that attempt to explain the exchange value or price of goods and…show more content…
This ratio depends on what technique of production are easible. Effective demand for labour Effective demand for labour can be described as the price at which the consumer of labour are willing and able to purchase labour. To put things in perspective, holding all other constant. If the labour is low, the demand for labour is high, the demand for labour would be low. Discuss the complementary and substitutability of labour and capital Complementary: labour on its own can be viewed as human prowess to work and produce, and capital can be viewed as man made means of production. Hence labour on capital go hand in hand on issues like education, vocational duties like menial jobs etc. In such a situation when labor increases capital increases and when labor reduces capital also reduces hence labor is directly proportional to capital. Substitute: labour and capital are indifferent in exchange e.g They are substitute to each other. Substitutes on the other hand then implies a situation where factors operate independently of other factors , therefore , for labor and capital to be substitutes it explains a situation where labor and capital are employed to operate independently of each other but instead serve as substitutes of each other. The substitutability of labor and capital implies an increase in labor, capital for labor decreases, capital itself decreases, the
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