2 Demand for labor Assume markets are competitive: each firm takes W,R,and P as given -Basic idea: A firm hires each unit of labor if the cost does not exceed the benefit. cost real wage benefit marginal product of labor MPL F(K,L+1)-F(K,L) CHAPTER 3 National Income slide 10 CHAPTER 3 National Income slide 10 Demand for labor ▪Assume markets are competitive: each firm takes W, R, and P as given ▪Basic idea: A firm hires each unit of labor if the cost does not exceed the benefit. cost = real wage benefit = marginal product of labor ▪ MPL = F (K,L +1) – F (K,L) 2