3.5 Labour Market

Question 1

What is the labour market

Answer 1

• composed of sellers of labour, househoulds
• buyers of labour, firms
  workers supply their labour and firms demand the labour

Question 2

what is the demand for labour

Answer 2

derived demand, dependent on the demand for goods/services
- if the demand for goods/services increases then the demand for labour will increase

Question 3

What factors influence the demand for labour

Answer 3

• the price of the product being produced
• the demand for the final product
• the ability to substitute capital for labour
• the productivity of labour

Question 4

How does the price of products produced effect the demand of labour?

Answer 4

• if the selling price of the product increases
• the marginal product of labour increases
• thus the firm will demand more labour
• higher priced products incentivise firms to supply more and demand for labour will continually increase with increasing prices

Question 5

how does the demand for the final product influence the demand for labour

Answer 5

• because its derived, when an economy is booming then demand for all goods and services will be high so the demand for labour will be high
• similarly when a recession occurs demand for g/s decreases so demand for labour will be lower

Question 6

how does the ability to substitute capital for labour effect demand for labour

Answer 6

• firms evaluate if it will be possible or more cost effective to switch from using labour to capital
• if it is more cost effective then demand for labour will fall

Question 7

how does the productivity of labour influence the demand for labour

Answer 7

• productivity increases lower average costs
• thus firms will most likely demand for more labour

Question 8

What is the labour productivity

Answer 8

measures output per worker, total output/total workers

Question 9

what are the competes of a labour market diagram?

Answer 9

y - wage rate
x - quantity of labour
D - MRP
S - MRC

Question 11

what is the wage elasticity of demand

Answer 11

how sensitive is the demand for labour to a change in wages

Question 12

What factors effect the PED for labour

Answer 12

• time
• substitutes
• elasciticty for demand of product
• proportion of total cost

Question 13

how does time effect the PED of labour

Answer 13

• the longer the time more elastic
• the firm can replace labour with machines in long run
• short run contracts of employment may mean firms have no choice but to employ the same num of workers
• thus in short run more inelastic

Question 14

how does substitureseffect the PED of labour

Answer 14

if its easier to change from labour to capital the demand for labour is more elastic

Question 15

how does the elasticity of demand for the product effect the PED of labour

Answer 15

• if the ped is more elastic labour will be high as demand Is price sensitive so firms can’t absorb high wage costs

Question 16

how does the proportion of total costs that are labour costs effect the PED of labour

Answer 16

the larger the proportion the higher the ped, more elastic
-e.g. labour-intensive industries

Question 17

What is occupational mobility

Answer 17

the ability of workers to switch jobs

Question 18

What is geographical mobility

Answer 18

the ability and willingness to move areas for job

Question 19

what is the real wage rate

Answer 19

wages taking into account inflation

Question 20

What are trade unions

Answer 20

• represent the interest of workers
• seek higher pay or better working conditions
• their power increases by collective bargaining

Question 21

what are the 2 categories the supply of labour can depend on

Answer 21

monetary + non-monetary reasons

Question 22

what are some monetary reasons for supply of labour

Answer 22

• wages
• bonuses
• commission
• performance related pay

Question 23

What are the non monetary considerations that effect the labour supply

Answer 23

• job satisfaction
• location
• family commitments
• commuting
• suits lifestyle

Question 24

what factors effect the supply of labour for a particular occupation

Answer 24

• skills and qualifications
• improvements in the occupational mobility of labour
• net migration of labour

Question 25

how does skills and qualifications effect the supply of labour

Answer 25

• the person has to have the skills qualifications, experience to do the job
• supply of labour depends on how many people are able to perform the task

Question 26

how does improvements in the occupational mobility of labour affect the supply of labour

Answer 26

• if more people are trained with necessary skills or qualifications (like GCSE’s) required to work in a particular occupations

Question 27

how does immigration affect the supply of labour for a particular occupation

Answer 27

• a rising flow of people seeking work in the UK will increase the supply of labour in th eUK
• it can relieve shortages of skilled labour in areas such as NHS or education, or meeting seasonal demand for workers in agriculture or construction industry