Final answer:
To obtain the market demand curve for labor, we must sum up all individual firms' demand for labor at each possible wage rate, aggregating them horizontally to reflect the total market demand.
Step-by-step explanation:
To construct the market demand curve for labor, one must aggregate the demand for labor across all firms at every possible wage rate. Understanding that the demand curve for labor is a graphical representation of the quantity of labor that employers are willing to hire at various wage levels, it becomes clear that to create a market demand curve, the individual labor demands from each firm need to be summed up horizontally. This horizontal summation reflects the total quantity of labor that firms in the market demand at every wage rate.
In practice, this means if the wage rate changes, each firm will adjust the amount of labor they demand based on the new wage, and the aggregate of their demands at this wage constitutes the market demand at that point. For instance, an increase in wage rates would typically diminish each firm's quantity of labor demanded, leading to a contraction in the market demand for labor. Conversely, a decrease in wage rates would spur firms to hire more workers, thus expanding the market's labor demand.