A Complication

But, in general, the price of the output will not remain steady as the wage changes. Here's the reason: if labor is cheaper, to the industry as a whole, that will shift the industry supply curve to the right. That will lead to lower prices for industry output. This leads to the slightly more complicated diagram in figure 2:

Figure 2: Changing Output Prices

As the wage drops from W₁ to W₂, the price of industry output drops from p to p', shifting the pMP curve to the left. The new pMP curve is shown by the dotted green line. This leads to a new profit-maximizing labor input at N₂. This means that the industry demand curve of labor is actually a little steeper than the VMP curve for a constant output price.