Assertion (A): The market demand curve for labour slopes downward.
Reason (R): Each firm demands less labour as the wage rate rises, and the market demand is the sum of the labour demanded by individual firms at different wages.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both (A) and (R) are true and (R) is the correct explanation of (A).
Assertion (A): The market demand curve for labour slopes downward. — True. At a higher wage, firms hire less labour, so the market demand curve for labour slopes down.
Reason (R): Each firm demands less labour as the wage rate rises, and the market demand is the sum of the labour demanded by individual firms at different wages. — True. Each firm’s demand for labour slopes down, and the market demand is the sum of all firms’ demands at each wage.
Why R explains A?
If every firm hires less at a higher wage, the total of their hiring is also smaller at that wage. Adding up downward-sloping curves gives a downward-sloping market curve.
NCERT (2026-27): “Wage Determination in Labour Market … Given the assumption of the law of diminishing marginal product, the fact that the firm always produces at w = VMPL implies that the demand curve for labour is downward sloping. To explain why it is so, let us assume at some wage rate w1, demand for labour is l1. Now, suppose the wage rate increases to w2. To maintain the wage-VMPL equality, VMPL should also increase. The price of the commodity remaining constantb, this is possible only if MPL increases which in turn implies that less labour should be employed owing to the diminishing marginal productivity of labour. Hence, at higher wage, less labour is demanded thereby leading to a downward sloping demand, curve. To arrive at the market demand curve from individual firms’ demand curve, we simply add up the demand for labour by individual firms at different wages and since each firm demands less labour as wage increases, the market demand curve is also downward sloping.” |