3.5.2 Supply of labour

Question 1

What is the individual supply of labour?

Answer 1

The willingness and ability of workers to provide their labour at a given wage rate

Question 2

What is occupational supply of labour?

Answer 2

The number of workers willing to work in that occupation at a given wage rate

Question 3

Why is the supply curve for labour upwards sloping?

Answer 3

As wage rate rises, individuals are pepared to work more hours and more workers will be attracted to the occupation which increases the labour supply

Question 4

What is the substiution effect?

Answer 4

As wages rise, the oppurtunity cost of leisure time increases which means that workers have an incentive to substitute more leisure with work which increases supply of labour

Question 5

What is the income effect?

Answer 5

As wages rise, ppl chose to work less hours as they have reached a level of income they are happy with (a target income) so they can afford to have more leisure time whilst maintaining their target income

Question 6

Backwards bending supply curve

Answer 6

As curve slopes upwards, the substitution effect is stonger
As curve slopes inwards, the income effect is stronger

Question 7

Factors which affect the supply of labour (5)

Answer 7

1. Job satisfaction - pecuniary and non precuniary benefits
2. The size of the working population in an area or country
3. The competitiveness of wages - bad for firms which pay poorly
4. The publicising of job oppurtunities
5. Net migration

Question 8

What are pecuniary benefits?

Answer 8

The welfare a worker gains from the wage they recieve

Question 9

What are non pecuniary benefits?

Answer 9

The welfare a worker can gain from non-wage benefits of their job e.g. flexible working hours, discounts, holiday allowance etc

Question 10

How does job satisfaction affect wages

Answer 10

Higher job satisfaction means that workers are more willing to accept lower wages as they gain high non pecuniary benefits
Lower job satfisfaction means that workers will want higher wages to compensate for the low pecuniary benefits

Question 11

What is the elasticity of supply of labour?

Answer 11

The reponsiveness of quantity supplied of labour to a change in the wage rate

Question 12

Factors which affect elasticity of supply of labour (3)

Answer 12

1. The level of skills and qualifications needed for a job
2. The time taken to develop skills needed for a job
3. Mobility of labour