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Microeconomics > 3.5 Labour Markets > Flashcards

3.5 Labour Markets Flashcards

1
Q

what is the demand for labour affected by

A
  1. wage rate
  2. demand for products
  3. productivity of labour
  4. substitutes for labour
  5. how profitable the firm is
  6. the number of firms in the market
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2
Q

how does the wage rate affect the demand for labour

A
  • the downward sloping demand curve shows the inverse relationship between how much the worker is paid and the number of workers employed
  • when wages get higher, firms might consider switching production to capital, which might be cheaper and more productive than labour
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3
Q

how does the demand for products affect the demand for labour

A
  • demand for labour is derived from the demand for products
  • the higher the demand for products, the higher the demand for labour
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4
Q

how does the productivity of labour affect the demand for labour

A
  • more productive workers = higher demand
  • less productive workforce = more workers needed
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5
Q

how do substitutes for labour affect the demand for labour

A

if labour can be replaced by cheaper capital, then the demand for labour will fall

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6
Q

how does the profitability of a firm affect the demand for labour

A

higher profits = more labour that can be afforded to employ

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7
Q

how does the number of firms in the market affect the demand for labour

A
  • determines how many buyers of labour there is
  • one employer = demand for labour is lower than if there were many employers
  • lower demand for labour can mean wages are lower so trade unions try to encourage higher wages
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8
Q

name the factors that affect the supply of labour to a particular occupation

A
  1. wage rate
  2. population demographics
  3. migration
  4. advantages of work
  5. leisure time
  6. trade unions
  7. taxes and benefits
  8. training
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9
Q

define the supply of labour

A

the number of workers willing and able to work at the current wage rate, multiplied by the number of hours they can work

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10
Q

how does the wage rate affect the supply of labour

A

the upward sloping supply curve shows the proportional relationship between how much the worker is paid and the number of workers willing and able to work

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11
Q

how does population demographic affect the supply of labour

A
  • more people willing and able to work, the higher the supply of labour
    this changes with:
  • retirement
  • school leaving ages
  • university students
  • immigration
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12
Q

how does migration affect the supply of labour

A
  • migrants are usually of working age
  • migration = supply of labour at all wage rates increase
  • particularly affects the supply of labour at the lower wage rates, as migrants are usually from economies with average wages lower than the UK minimum wage
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13
Q

how do the advantages of work affect the supply of labour

A
  • can influence how much people prefer to work
  • linked to non-monetary advantages
  • afford childcare
  • holiday entitlements
  • promotion potential
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14
Q

how does leisure time affect the supply of labour

A
  • substitute for work
  • part-time and early retirements are attractive options
  • substitution effect
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15
Q

what is the substitution affect

A

rationally, a worker responds to the rise in hourly wage rate by substitution more labour time in place of leisure time (specifically relevant for low-income workers)

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16
Q

what type of good is labour

A

inferior good - increase income = decrease work

17
Q

how do trade unions affect the supply of labour

A
  • attract workers to the labour market because they know their employment will be defended
  • however, the limits on workers, such as limiting their ability to strike
18
Q

how do taxes and benefits affect the supply of labour

A

if taxes are too high and benefits are too generous, people might be inclined to withdraw from the labour market

19
Q

how does training affect the supply of labour

A
  • unappealing if a lot of training or high qualifications are required for a job
  • appealing if the government subsidises training, it is easier for workers to gain the necessary skills for a job
20
Q

what is the income effect

A

a rise in hourly wage rate increases the workers real income and as income increases, so does the demand for the normal good - leisure time

21
Q

why do people work

A

net advantage

22
Q

what is the net advantage

A
  1. welfare derived from the wage
  2. welfare derived from the work

Microeconomics (11 decks)

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