Why is the demand for labor called derived demand

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Question

Explain to your classmate the impact on Target if Walmart raises its minimum wage to $15 per hour, despite the federal minimum wage being fixed at $7.25 per hour.

Why is the demand for labor called a derived demand?

Given that it is derived from the demand for the firm's output, the demand for labor is known as derived demand. If there is a rise in demand for the company's products, the company will want more labor and eventually hire more employees. It is called "derived demand" for this reason.
In the labor market, what are the firm's demand curve for labor and the workers' supply curve of labor?

The downward-sloping component of the factor's marginal revenue product curve is the demand curve for labor within a firm. The pay rate's effect on the demand for labor has a declining slope. By combining the demand curves for labor of various enterprises, the market's labor demand may be calculated.

How is a firm's wage normally determined in the labor market?

The wage in a labor market is determined by the intersection of demand and supply. In a perfectly competitive labor market, the employer and employee are wage-takers, meaning they can't influence the wage. Once the wage in a particular market has been established, individual firms in perfect competition take it as given.

How could Amazon decide to raise its minimum wage to $15 per hour, despite the federal minimum wage being fixed at $7.25 per hour?

The billionaire CEO is not being motivated by high ideals but by cold, hard cash considerations. With the official unemployment rate falling to the lowest level in nearly two decades, large employers like Amazon are increasingly competing for workers, particularly for the upcoming holiday rush. In January, Walmart raised its minimum wage to $11. Facebook boosted its minimum wage for janitorial staff, food-service workers and other contractors to $15 an hour and Costco pays $14 an hour.
What are positive and negative effects of Amazon raising its minimum wage to $15 per hour on its employees, total revenue, and other companies and their employees?

There will be a raise, but they are taking away our bonus at the end of the month and the stocks we were entitled to. Workers are still not getting medical treatment after getting injured. Workers are still starving. Workers are still homeless. To call $15 a "living wage" is ludicrous. The average hourly wage in manufacturing four decades ago would be the equivalent of $23 an hour in 2018 dollars.

Reference no: EM133999834

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