 Hi, Gerald Friedman, Professor of Economics at the University of Massachusetts. We're here to talk about labor demand in the orthodox model. The neoclassical demand for labor. And this is based on the idea that you hire workers whenever you can make money off them. Kind of might seem pretty obvious. They actually go a little further and it's kind of neat. And it starts with the marginal product of labor, which we call the MPL. The marginal product of labor. The amount that an additional worker adds to your total output, presumably the marginal product of labor falls when you add additional workers. This is the basic premise of the whole theory. You have a certain amount of land, you have a certain amount of machinery, equipment, whatever. You want to increase output. The way you do it is by adding workers. In the short run, you can't add land. By definition, you can't add machinery. What you add is workers. So, your first worker is out there, say picking strawberries. They're a big field of strawberries. The worker goes along, picks the most convenient strawberries, puts them in the basket, moves on. Gets a lot of strawberries. Maybe 20 quarts. Second worker, you're doing really well. So, you think you'll get another worker. Second worker comes in and that worker, it's not as easy. That's to maybe lift up some leaves. Have you ever done a strawberry picking? This is what happens. You go underneath, you get the strawberry plants that aren't as easily accessible. Total output goes up to 35 quarts. The second worker adds 15 quarts of strawberries to the 20 that the first worker picked. Third worker, it's a little harder. Total output goes up to 45. 10 quarts. Fourth worker only adds 8 quarts. Fifth worker only adds 7. We can keep going and you see where this is heading. That may be worker number 10 or something. No extra output. You're completely maxed out how much you can produce by adding workers to the existing amount of land, etc. How many workers do you want to hire? You're not paying workers strawberries. You're paying workers in dollars and your profit is not in strawberries. How many strawberries can you eat before you start getting allergic or something? Get hives and itchy and no good. You want money. You sell the strawberries for, say, $10 a quart. First worker gives you $200. Second worker, $150. You see where this is going. But the fifth worker, you're getting $70, which is still pretty good. How many workers do you hire? Depends on the wage. You have this column. Say your workers are paid $100. Hire the first worker, $200 output, cost you $100. Bingo. Second worker, $150 output. Do it. Third worker, $100. Stop. You hire at $100 wage. You hire three workers. Total output at a wage of $100, 45 quarts of strawberries. What happens if wages go down? Say they become dropped to $70. Hire five workers. Total output goes up. Wages rise. Maybe they go up to $200. Because Debbie's here, and so you want higher wages. So you go up to $200. Hire only one worker, 20 quarts of strawberries. Higher wages, fewer workers. Lower wages, more workers, and more output. More productive workers make this column bigger numbers. More workers get hired at any wage. Less productive workers, fewer workers at any wage. The only way to get the same number of workers hired is to lower the wage. That is the orthodox theory of labor demand. Thank you.