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In classical economics, the labour demand curve is derived from the marginal productivity of labour (MPL). Firms hire labour up to the point where the real wage (W/P) equals the MPL. As MPL diminishes with increased labour (due to the law of diminishing returns), the labour demand curve slopes downward. Mathematically, W/P = MPL This implies that as real wages fall, firms are ________ _____ _________ _______ _____ ________ _________ _____ ________ ____ _________.
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