Abstract This research examines the relationship between the product and labor market in a situation when there is imperfect competition in the product market. The subjects studied are the existence of the mark-up factors implied by imperfect competition and their impacts on labor demand. The dependency of labor demand on the product demand is also examined. In the research the existence of the mark-up factors in Finnish companies can be verified. In addition, according to results, the mark-up factors have negative impact on labor demand. Product demand has a significant positive effect on labor demand. However, the transmission mechanism from the product demand changes to labor demand remains to some extent unsolved.