The demand for labour is known as a derived demand. This means that businesses do not hire workers for the sake of the work itself, but because consumers want the products or services those workers help create. Consequently, when consumer demand for a product increases, the demand for the workers needed to make that product also increases.

Key factors in labour demand include:

• Downward-sloping curve: As the wage rate decreases, businesses are willing to hire more workers, assuming other factors remain the same.
• Marginal Revenue Product (MRP): This determines how many workers a firm will hire. Businesses will continue to add staff until the extra revenue earned from one additional worker is equal to the cost of their wage.