3.5.2 Labor Market

Question 1

what type of demand is demand for labour?

Answer 1

derived

Question 2

what causes movements along the demand curve for labour?

Answer 2

chnages in wage rate/ salary

Question 3

what factors cause shifts in demand curve for labour?

Answer 3

1. chnages in the productivity
2. chnages in price of the good labour produces
3. chnages in demand of the good labour produces
4. chnage in the price of capital

Question 4

how does chnages in productivity of labour affect demand?

Answer 4

more productive–> increased demand

if labour is more productive they can produce more

Question 5

how does changes in the price of the good labour produces affect demand for labour?

Answer 5

as the price of the good increases, so will demand for labour. (to expand output need to expand input production)

Question 6

how do chnages in the price of capital affect demand?

Answer 6

if capital becomes more expensive, demand for labour increases. it is cheaper to hire more workers than to automate the process

Question 7

describe the substitution effect and the income effect

Answer 7

• substitution effect: substituion of lesuire time, as workers are incentivised to work longer hours
• income effect: higher wages encourages consumers to increase their consumption and have more leisure time

Question 8

draw the (individual) labour supply curve

Answer 8

Question 9

what causes shifts in the individual labour supply curve?

Answer 9

fringe benefits: training, pension schemes, job security, subsidised meals, cars

Question 10

what is the shape of the (market) labour supply?

Answer 10

upwards sloping: more people will offter themselves when wage is high

Question 11

what factors cause shifts in the (industry) supply curve?

Answer 11

• size of the working age population
• wages on offer in substitute occupations
• barrier to entry
• fringe benefits
• overtime