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Labour Demand Analysis Worksheet

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Labour Demand Analysis Worksheet

A café in regional Australia is reviewing its staffing as customer demand and technology change. Use the case study and data to analyse its demand for labour. Show working where needed; dollar amounts are in Australian dollars (A$).

Case study: Harbour Bites

Harbour Bites sells takeaway lunches. Its owners hire workers to help produce meals, so demand for labour is derived from demand for the café’s output. The café sells each meal for A$18. In a typical shift, each additional worker increases output by fewer meals than the previous worker because kitchen space and equipment are limited. The cost is A$180 per worker per shift, including on-costs. A nearby office complex is considering a subsidy for local lunch purchases, which could increase meal sales. The café is also considering a faster oven that would complement kitchen workers, while a self-service ordering kiosk could replace some counter tasks. Assume the product price and wage remain constant unless a question says otherwise.

1.Explain why the café’s demand for workers is called derived demand. Use a detail from the case study.

2.Which change would most directly increase the café’s demand for labour, all else equal?

A rise in the wage rate
A fall in demand for takeaway meals
A subsidy that increases customers’ demand for local lunches
A rise in the cost of an input that complements labour

3.In a competitive labour market, a profit-maximising café hires workers up to the point where the value of the extra output from the last worker is approximately equal to the wage. What is this value called?

Use the data

The table shows output per shift as the café adds workers. Each meal sells for A$18, and each worker costs A$180 per shift. Marginal product (MP) is the increase in output from one more worker. Marginal revenue product (MRP) = MP × meal price.

Workers

Total meals

MP (meals)

MRP (A$)

—

4.Complete the MP and MRP columns for workers 1–4. Show one sample calculation.

5.With a wage of A$180 per shift, how many workers should the café hire from this schedule to maximise profit? Explain using the MRP of the last worker hired and the next worker.

6.Draw a labour demand (MRP) curve using the schedule. Put employment (number of workers) on the horizontal axis and wage/MRP (A$ per shift) on the vertical axis. Plot the marginal values for workers 1–4 and show the hiring decision at a wage of A$180.

7.The faster oven raises the number of meals each kitchen worker can produce, and it works alongside rather than replacing them. Predict what happens to the café’s MRP of kitchen labour and labour demand. Explain briefly.

8.The café installs a self-service kiosk that performs some counter-ordering tasks. If the kiosk substitutes for counter workers, what is the most likely effect on demand for those workers? Distinguish a shift in labour demand from a movement along the curve.

9.Match each change with its most likely effect on the café’s demand for labour. Write the correct letter beside each numbered effect. Effects may be used more than once.

A. More customers want the café’s meals
B. A higher wage, with other conditions unchanged
C. A productivity-raising oven that complements workers
D. A kiosk substitutes for counter workers

2. Labour demand increases: curve shifts right
4. Labour demand remains unchanged: no shift in the curve
3. Labour demand decreases: curve shifts left
1. Quantity of labour demanded decreases: movement along the curve

10.Give one realistic government policy that could increase labour demand in an Australian industry, and explain the link. Then give one policy or change that could reduce labour demand in a particular occupation, and explain why. Consider effects on firms rather than workers’ willingness to work.