3.5.1

Question 1

What’s demand for labour?

Answer 1

The amount of workers an employer is willing and able to hire at given wage rate in a given time period.

Question 2

Name 2 factors that can affect demand for labour

Answer 2

• The productivity of a workforce
• The cost of capital
• Change in real wage
• Change in selling price that labour was produced

Question 3

What type of relationship do demand for labour and wage rate have?

Answer 3

They have an inverse relationship.

If wage rate is high then it’ll be more costly for a business to employ people

Question 4

What does a demand for labour graph look like?

7 LABELS

Answer 4

• Y axis labelled as “Wage Rate”
• X axis labelled as “QLabour”
• Demand line labelled as “DL”
• Supply line labelled as “SL”
• “W1, W2” labelled across the Y axis to show increases and decreases of the wage rate
• “E1, E2” labelled across the X axis go show the increases and decreases of the employment rate

Question 5

What is the definition of employment?

Answer 5

The percentage of the population of working age in full-time or part-time paid work.

Question 6

What does MRP stand for?

Answer 6

Marginal revenue product.

Question 7

What’s the formula for MRP?

Answer 7

MPP X Selling Price

Question 8

What’s the definition of MRP?

Answer 8

The addition to total revenue as a result from hiring another employee.

Question 9

What’s one thing that we assume about labour and capital?

Answer 9

We assume that labour and capital are close substitutes to each other.

For example, you can substitute a machine for 2 employees

Question 10

What’s the definition of elasticty of demand for labour?

Answer 10

The elasticity of demand for labour is thee responsiveness of demand for labour to a change in the wage rate.

Question 11

What’s the formula for the elasticity of demand for labour?

Answer 11

%Change in Wage Rate

Question 12

What one thing that won’t cause a shift oncthe demand for labour curve?

Answer 12

The change in wage rate.

Question 13

What’s a long-run factor that can cause a change in demand for labour?

Answer 13

The change in the cost of capital.

This is because capital is a fixed factor of production which can only be changed in the long-run.

Question 14

What does it mean when demand for labour is a derived demand?

Answer 14

This means it depends on demand for the product the worker is producing.