output in a perfectly competitive market, the value of each worker’s output will be the market price of the
product. Thus,

Demand for Labor = MPL x P = Value of the Marginal Product of Labor

We show this in Table 14.2, which is an expanded version of Table 14.1

# Workers (L)

MPL

1

4

2

3

3

2

4

1

Price of Output $4

$4

$4 $4

VMPL

$16 $12 $8 $4

TABLE 14.2 Value of the Marginal

Product of Labor
328 14 • Labor Markets and Income

Note that the value of each additional worker is less than the value of the ones who came before.

FIGURE 14.3 Value of the Marginal Product of Labor For firms operating in a competitive output market, the value of
additional output sold is the price the firms receive for the output. Since MPL declines with additional labor
employed, while that marginal product is worth the market price, the value of the marginal product declines as

employment increases.

Demand for Labor in Perfectly Competitive Output Markets
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