Explain how a firm derives its demand curve for labour and consider how the structure of the product market in which the firm operates affects the firm's demand curve for labour.

Mark scheme

Marking points from the official mark scheme (May/June 2018). The mark or mark type is shown in brackets.

1. The demand for labour is derived from MRP (MPP X MR). The MRP includes the MR of selling the product so it is important to consider whether the firm is a price-taker (and hence facing a constant MR) or has a downward sloping MR curve.
2. L4 (9-12 marks) For an explanation of the derivation of the demand curve for labour and a comment on the effect of the difference of MR in 2 different types of product market.
3. L3 (7-8 marks) For an explanation of the derivation of the demand curve for labour and its link to one type of product market.
4. L2 (5-6 marks) For an explanation of the derivation of the demand curve for labour.
5. L1 (1-4 marks) For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis will be substantial.
6. Discussion of whether TU negotiations lead to (i) rising unemployment (ii) the circumstances in bilateral monopoly where a TU with sufficient power can negotiate both higher wages and higher employment or (iii) closed shop.
7. L4 (9-13 marks) For a thorough discussion of both situations. Maximum 11 no conclusion.
8. L3 (7-8 marks) For a competent explanation a full analysis of one situation or a partial analysis of two sides.
9. L2 (5-6 marks) For an accurate though undeveloped explanation concentrating on only one side.
10. L1 (1-4 marks) For an answer which shows some knowledge but does not indicate that the question has been fully grasped. The answer will have some correct facts but include irrelevancies. Errors of theory or omissions of analysis will be substantial.