-2
$\begingroup$

W/Vmp = ? I think it is the marginal product....but I have really no clue....any help on this?

$\endgroup$
  • $\begingroup$ Are you sure this isn't W=Vmp? W/Vmp should equal 1... $\endgroup$ – Lee Sin Dec 2 '16 at 19:14
  • $\begingroup$ I dont know man, I really dont.... $\endgroup$ – Bak1139 Dec 2 '16 at 19:23
  • $\begingroup$ Is this a homework question where they're asking you to figure out what W/Vmp equals? $\endgroup$ – Lee Sin Dec 2 '16 at 19:39
  • 1
    $\begingroup$ Why on Earth would you want to know the meaning of a formula without knowing anything about the context? $\endgroup$ – Giskard Dec 2 '16 at 21:55
1
$\begingroup$

$W$ = Wage

$VMP$ =Value of Marginal Product

When $W/VMP$ <1, workers generate more value than they cost to pay. Hire more workers.

When $W/VMP$ >1, workers generate less value than they cost to pay. Hire less workers.

Therefore when $W/MVP$ = 1 you are purchasing your optimal amount of labour.

$\endgroup$

Not the answer you're looking for? Browse other questions tagged or ask your own question.