A movement along the demand curve for labour happens only when the wage rate changes. This causes a change in the quantity of labour that businesses want to hire, rather than a change in the overall demand for labour.

The relationship works as follows:

• When the wage falls, employers demand more workers. This is called an extension along the curve.
• When the wage rises, employers demand fewer workers. This is called a contraction along the curve.

This movement is different from a shift of the entire demand curve. A shift happens when external factors change, such as new technology, changes in worker productivity, or a change in the demand for the final product.

The downward slope of the demand curve is explained by the law of diminishing marginal returns. This means that as you add more workers, each new worker contributes less to total production and revenue than the one before them.