Overview
The demand for labor follows some of the same rules as the demand for other goods in the economy, but has properties that are peculiar to labor itself.
Profit Maximizing Demand
A profit maximizing firm faces a choice of how much Labor ({% L %}) and capital {% K %} to employ in order to maximize profit. Standard arguments show that the firm chooses the level of labor and capital such that the marginal revenue from labor equals the marginal cost, and the marginal revenue from captial equals the marginal cost of capital.
{% MR_{L} = MC_{L} %}
and
{% MR_{K} = MC_{K} %}