3.5 Labour market Flashcards
What is the demand for labour?
The amount that firms are willing to pay for a certain number of workers.
What is derived demand?
Means that the demand for labour is dependent on demand for the final goods and services that worker produce.
What is the relationship between wages and demand for labour?
Inverse.
State three factors influencing the demand for labour:
Level of consumer demand for the final product - more workers will be required to cope with rise in demand.
Price of the product - if the price of the product rises then firms are likely to be willing to employ more workers.
Cost of capital - capital may be more productive and efficient than labour and actually be cheaper to employ in the long run.
What is the supply of labour?
The number of workers willing and able to work at given wage.
What is the relationship between wages and supply of labour?
Positive.
State three factors influencing the supply of labour:
The size of population - this impacted by birth rates as well as net migration.
Since the UK left the EU, there has been a shortage of workers to pick fruit and vegetables.
The quality and content of education - some firms face shortages of workers with appropriate and up to date knowledge fort certain roles.
Income tax rates and out-of-work benefits - a reduction in income tax rates and a fall in unemployment benefits would result in an increased supply of workers.
What is geographical immobility of labour?
Where some workers find it hard to move to different places to seek and find work. E.g. due to the cost of relocating.
What is occupational immobility of labour?
Where some workers find it hard to move between jobs because they lack appropriate skills or training. E.g. in dynamic markets, job skills could become obsolete quickly.
What happens if wages are too high in a competitive market?
Labour supply will be high but labour demand will be low - there will be an excess supply leading to unemployment - workers will have to then accept lower wages or face unemployment as the level reaches equilibrium.
What happens if wages are too low in a competitive market?
Labour demand will be high and labour supply will be low - there will be excess demand and therefore a shortage - employers will have increase wages as the level reaches equilibrium.
