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Economic Theory

Сontinues Table 4.1

Factors Results
Technology Technology changes can act as either substitutes for or complements
to labor. When technology acts as a substitute, it replaces the need
for the number of workers an employer needs to hire. For example,
word processing decreased the number of typists needed in the
workplace. This shifted the demand curve for typists left. An
increase in the availability of certain technologies may increase the
demand for labor. Technology that acts as a complement to labor
will increase the demand for certain types of labor, resulting in a
rightward shift of the demand curve. For example, the increased use
of word processing and other software has increased the demand for
information technology professionals who can resolve software and
hardware issues related to a firm’s network. More and better
technology will increase demand for skilled workers who know how
to use technology to enhance workplace productivity. Those workers
who do not adapt to changes in technology will experience a
decrease in demand.
Number of An increase in the number of companies producing a given product
Companies will increase the demand for labor resulting in a shift to the right. A
decrease in the number of companies producing a given product will
decrease the demand for labor resulting in a shift to the left.
Government Complying with government regulations can increase or decrease the
Regulations demand for labor at any given wage. In the healthcare industry,
government rules may require that nurses be hired to carry out
certain medical procedures. This will increase the demand for nurses.
Less-trained healthcare workers would be prohibited from carrying
out these procedures, and the demand for these workers will shift to
the left.
Price and Labor is not the only input into the production process. For example,
Availability a salesperson at a call center needs a telephone and a computer
of Other terminal to enter data and record sales. The demand for salespersons
Inputs at the call center will increase if the number of telephones and
computer terminals available increases. This will cause a rightward
shift of the demand curve. As the amount of inputs increases, the
demand for labor will increase. If the terminal or the telephones
malfunction, then the demand for that labor force will decrease. As
the quantity of other inputs decreases, the demand for labor will
decrease. Similarly, if prices of other inputs fall, production will
become more profitable and suppliers will demand more labor to

increase production. The opposite is also true. Higher input prices
lower demand for labor.

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