2.7 Labour Market

Question 1

What is National Insurance

Answer 1

A tax payed by workers and employers to go toward state benefits

Question 2

What is a pension

Answer 2

A fixed amount payed to someone who has retired

Question 3

Definition of Labour Market

Answer 3

Where households sell labour and firms buy labour consists of firms demand for labour and supply of labour from households

Question 3

What is the definition of demand for labour

Answer 3

The total number of people firms are willing and able to hire at a given wage rate at a given time

Question 4

Factors that shift the demand for labour

Answer 4

• The state of the economy of a whole (if the economy is doing well then demand for labour will increase)
• The profitiabilty of firms (more profitabke firms will demand more labour)
• The demand for the product (labour demand is derived demand so if there is high D for the product, there is high D for labour)
• The productivity of labour (if labour is more productive than capital then more labour demand)

Question 5

What is the supply of labour

Answer 5

the total number of people willing to supply their labour at a given wage rate at a given time

Question 6

Factors that shift the supply of labour

Answer 6

• the size of the working population
• monetary factors other than wage (overtime, holidays etc)
• Education requirements (more bricklayers than surgeons available)
• Barriers to entry (union, or requirements)
• Non-Monetary Factors (jobs that have better wokring conditions, better job security)
• Labour Mobility

Question 7

What is Wage Elasticity of Demand

Answer 7

WED measures the responsiveness of of quantity demanded to a change in wage

Question 8

What is Wage Elasticity of Supply

Answer 8

Measures responsiveness of quantity supplied to changes in wage

Question 9

Factors affecting Wage Elasticity of Demand

Answer 9

1. Ease and Cost of factor subsitution (if easier then elastic)
2. Price Elasticity of demand for the final product (if PED is more elastic, TR goes down if price goes up so Labour will also be elastic)

Question 10

Factors affecting Wage Elasticity of Supply

Answer 10

1. Training Requirements, lower skilled jobs will have more elastic supply as training is not long
2. Labour Mobility (occupational or geographical, easier to train or relocate, the more elastic)
   3.