4.1 Demand and Supply at Work in Labor Markets

Question 1

How does the law of demand apply in labor markets?

Answer 1

Higher wages lead to a decrease in the quantity of labor demanded by employers while a lower salary or wage leads to an increase in the quantity of labor demanded

Question 2

_______ is a higher price in the labor market

Answer 2

Salary; Wage

Question 3

How does the law of supply apply to labor markets?

Answer 3

A higher price for labor leads to a higher quantity of labor supplied; a lower price leads to a lower quantity supplied

Question 4

_______ is when quantity of employees supplied and quantity demanded for hire are equal;
Neither an excess or deficit is observed in the job market

Answer 4

Labor Market Equilibrium

Question 5

_______ tend to move the price of labor toward equilibrium in the case of excess supply or demand.

Answer 5

Economic Incentives

Question 6

A change in salary or wage will result in a change in the ________ of labor

Answer 6

Quantity Demanded

Question 7

The _______ curve for labor show the quantity of labor employers wish to hire at any given salary or wage rate under the ceteris paribus assumption.

Answer 7

Demand Curve

Question 8

If quantity demanded decreases the result is an ________ movement along the demand curve;
If quantity demanded increases the result is a ______ movement along the demand curve

Answer 8

Upward;Downward

Question 9

The demand for labor is called a _______

Answer 9

derived demand

Question 10

________ is when a want for one good or service is dependent on the want for another good or service.

Answer 10

Derived Demand

Question 11

What two things can change the demand for labor?

Answer 11

1. The Price of the Good Produced:
   Increase Price = Increase Demand in Labor
   Decrease Price = Decreased Demand for Labor
2. A Change in Labor Productivity

Question 12

What two things can change Labor Supply?

Answer 12

1. A change in the wage rate in competing markets.
   -If competing industries offer competitive wages
   -Higher wages = Decreased supply of labor
   -If competing industries offer
   -lower wages =Increased supply of Labor
2. Barriers to Entry
   Permits, Licenses, prior training or experience, Certificates

Question 13

What are other factors that can change Labor Supply?

Answer 13

-Immigration of Population Growth
- More people looking for jobs
-supply of labor increases
-Driving down WR and increasing the Qe
Stricter immigration laws or slower population growth (shrinking population)

Question 14

What are two examples of Price Floors in Labor Market>

Answer 14

1. Living Wages

2. Minimum Wages

Question 15

a ______ is a type of price floor that makes it illegal for an employer to pay employees less than a certain hourly rate.

Answer 15

minimum wage

Question 16

A higher minimum wage

Answer 16

living wage

Question 17

Where is the minimum wage set in relation to the equilibrium wage?

Answer 17

very close to the equilibrium wage or even slightly below it

Question 18

Historically U.S. Minimum Wage has had little to no impact on ______

Answer 18

Employment

Question 19

________ means the price floor is not the market outcome.

Answer 19

Non-Binding

Question 20

The minimum wage has little to no effect on the quantity of employment as long as it ________

Answer 20

stays just below the minimum wage.

Question 21

What can be cons of raising minimum wage?

Answer 21

• Low skilled worker demand decreases affecting struggling families
• Raising minimum wage would decrease the number of hours worked, due to higher pay.