17) Labour Markets Flashcards
What does derived demand mean
⚫️demand for labour is determined by
➡️demand of goods and services the produce
In the labour markets, who supplies and demands
⚫️The household supply labour
⚫️businesses demand labour
Give and example pf demand for labour during economic boom
⚫️demand for car increases
➡️so demand for car workers will also increase
How else does demand for labour increase
⚫️if workers being more productive
⚫️if capital become more expensive
➡️capital and labour are substitutes
Describe the diagram showing the demand and supply of labour ⚫️whats on the y-axis ⚫️whats on the x-axis ⚫️why is the SL upward sloping ⚫️why is the DL downward sloping
⚫️y-axis=wage rate (price of labour)
⚫️x-axis=quantity of labour
⚫️supply curve of labour is upward sloping showing
➡️as wage rate increases
➡️more workers supply their labour
➡️work becomes more attractive than leisure
⚫️demand curve of labour is downward sloping showing
➡️as wage rate decreases
➡️its cheaper to hire more workers
➡️so firms demand more labour
What factors determine the supply of labour and causes the supply curve to shift
⚫️increase in working population
⚫️changes in non-monetary rewards
⚫️benefits
⚫️income tax
⚫️immigration
⚫️population
How is increase in working population causes the supply of labour shifts to the right
⚫️increase female participation rates
➡️due to changing social trends
Give example of non-monetary rewards causes the supply of labour shift to the right
➡️e.g.better working conditions
Give examples of how benefits causes the supply of labour to decrease
➡️e.g if state benefits are generous
➡️more likely to stay at home
➡️rather than work
➡️reducing the labour supply
Give example of how income tax is high, causes the supply of labour to shift
➡️e.g if income tax is high ➡️reduces incentive to work ➡️but workers may also feel ➡️need to work longer hours ➡️to compensate for reduction in pay
Give an example of how immigration caused the supply of labour to shift
⚫️since 2004
➡️uk has seen a large increase in immigration from eastern and central europe
➡️increasing the labour supply
Explain how increase population and ageing population causes the supply of labour to shift
➡️the increase in the size of population ➡️increases size of labour ➡️but ageing population ➡️reduces size of working population ➡️reduces supply of labour
What is the arguments for national minimum wage
⚫️reduces poverty and inequality in the distribution of income
⚫️higher wages
➡️increases incentive to work
➡️increase supply of labour
➡️and productivity
⚫️reduces the unemployment trap
How is reducing the unemployment trap, an advantage of NMW
⚫️higher wages mean
➡️unemployed workers more incentive to find a job
➡️opportunity cost of being on benefits increases
➡️positive government finances ➡️increases tax revenue ➡️from employed workers ➡️reduction in benefit payments ➡️to unemployed workers
What are the disadvantage of the NMW
⚫️can cause unemployment
⚫️pay differentials
⚫️regional differences
