Hicks-Marshall laws of derived demand

Economics

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

, the Hicks–Marshall laws of derived demand assert that, other things equal

Ceteris paribus

or is a Latin phrase, literally translated as "with other things the same," or "all other things being equal or held constant." It is an example of an ablative absolute and is commonly rendered in English as "all other things being equal." A prediction, or a statement about causal or logical...

, the own-wage elasticity

Elasticity (economics)

In economics, elasticity is the measurement of how changing one economic variable affects others. For example:* "If I lower the price of my product, how much more will I sell?"* "If I raise the price, how much less will I sell?"...

of demand

Demand

- Economics :*Demand , the desire to own something and the ability to pay for it*Demand curve, a graphic representation of a demand schedule*Demand deposit, the money in checking accounts...

for a category of labor is high under the following conditions:

When the price elasticity of demand
Price elasticity of demand
Price elasticity of demand is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. More precisely, it gives the percentage change in quantity demanded in response to a one percent change in price...

for the product being produced is high (scale effect). So when final product demand is elastic, an increase in wages will lead to a large change in the quantity of the final product demanded affecting employment greatly.
When other factors of production can be easily substituted for the category of labor (substitution effect).
When the supply of other factors of production
Factors of production
In economics, factors of production means inputs and finished goods means output. Input determines the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called a production function...

is highly elastic (that is, usage of other factors of production can be increased without substantially increasing their prices) (substitution effect). That is, employers cannot easily replace labor as doing so will lead to a large increase in other factor prices making it useless.
When the cost of employing the category of labor is a large share of the total costs of production (scale effect)

The "Hicks–Marshall" is named for economists John Hicks

John Hicks

Sir John Richard Hicks was a British economist and one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economics were his statement of consumer demand theory in microeconomics, and the IS/LM model , which...

(from The Theory of Wages
The Theory of Wages
The Theory of Wages is a book by the British economist John R. Hicks published in 1932 . It has been described as a classic microeconomic statement of wage determination in competitive markets...

, 1932) and Alfred Marshall

Alfred Marshall

Alfred Marshall was an Englishman and one of the most influential economists of his time. His book, Principles of Economics , was the dominant economic textbook in England for many years...

(from Principles of Economics
Principles of Economics (Marshall)
Principles of Economics was a leading political economy or economics textbook of Alfred Marshall , first published in 1890. It ran into many editions and was the standard text for generations of economics students.-Writing:...

, 1890).

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