5.3 Microeconomics Labour Markets Flashcards

1
Q

Labour

A

A factor of production which uses human capital

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2
Q

Derived demand

A

Where the demand for a factor of production is based upon the demand for a product.

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3
Q

Demand for labour

A

Willingness and ability of a firm to hire labour at differnet wage rates.

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4
Q

Wage

A

The cost of a unit of labour (the marginal cost)

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5
Q

Marginal revenue product of labour

A

the additional revenue received by a firm as it increases output by using an additional unit of labour input

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6
Q

MPPxP=

A

Marginal revenue product of labour (MRPL)

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7
Q

Marginal physical product

A

Amount of additional output produced if the firm increases its labour input by 1 unit (i.e. adding one more person-hour)

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8
Q

MRPL

A

Marginal revenue product of labour

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9
Q

How does the firm decide how many workers to employ?

A

Where MRPL=MC (wage rate).

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10
Q

What happens to the demand for labour during a recession?

A

It falls

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11
Q

Wage elasticity of labour demand calculation

A

%change in quantity demanded for labour/% change in wage

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12
Q

What does wage elasticity of demand measure?

A

Responsiveness of demand for labour by firms when there is a change in the wage rate.

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13
Q

What factors affect WEDL?

A

Proportion of labour costs as % of total costs, ease of factor substitution; PED for final product;time period

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14
Q

What can make WEDL more elastic?

A

Long run; easier to substitute capital to replace labour; high proportion of labour costs; PED greater than 1 (elastic)

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15
Q

What will happen to the demand for labour if there is a rise in demand for the good?

A

Shifts right

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16
Q

What will happen to the demand for labour if labour becomes more productive.

A

Shifts right

Increases MRP so labour becomes more cost efficient compared to capital.

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17
Q

What happens to the demand for labour if capital equipment becomes cheaper?

A

Shifts left.

18
Q

What is the supply of labour?

A

The number of houses people are willing and able to work at a given wage rate.

19
Q

What is the relationship between labour and supply- positive or negative?

A

Positive- as wages rise, more people enter the labour market.

20
Q

What influences the supply of labour?

A

Wage rate, nonpecuniary conditions; amount of training; migration; fliexibility and location; age structure; attitude to work.

21
Q

What are demographics?

A

Proportion of different age groups and men and women in the whole population

22
Q

What does non-pecuniary mean?

A

not consisting of money

23
Q

What non-pecuniary factors can affect the supply of labour?

A

Working conditions, amount of leisure time, facilities at work, ability to work flexible hours, career progression opporutnities, extent of autonomy given in the job.

24
Q

Wage elasticity of labour supply

A

the responsiveness of the quantity of labour supplied to a change in the wage rate.

25
Q

Formula for WESL

A

%change in the quantity of labour supplied/ the %change in the wage.

26
Q

What factors affect the WESL?

A

Nature of skills required to work in an industry; length of training; if the work is vocational; time period

27
Q

Why might people be unwilling to move to a new job?

A

family; financial costs; regional variations in house prices; cost of renting; mirgration controls; cultural and language barriers; transport costs.

28
Q

Why might people be unable to swap into a new industry?

A

Skill gaps; training gaps; exsperience gaps; confidence and motivational problems; discrimination

29
Q

What is structural unemployment?

A

Where workers have the skills from obsolete industries and so are unable to work in new and growing industries.

30
Q

What can limit the supply of labour and act as a discincentive to work?

A

Marginal rate of tax; high benefit payments; poor child care options

31
Q

What are the assumptions of a perfectly competitive labour market?

A

Many workers and firms, all of whom are homogenous; no worker or firm can influence the wage rate; no barriers to entry; perfect information; firms can employ as much labour as they like at the prevailing wage rate.

32
Q

Monopsony employer

A

Sole or dominant employer in the labour market

33
Q

Who is more powerful in a monopsony market?

A

The monopsony employer because they have buying power over the employees.

34
Q

What are the causes of labour market failure?

A

Monopsony, trade union; discrimination, geographical and occupational inflexibilities

35
Q

What is economic rent?

A

Any amount above the minimum need to keep a factor of production in its current use.

36
Q

What are transfer earnings?

A

The minimum amount needed to keep a factor of production in its current use.

37
Q

Wage differentials

A

Differences in wages between workers with different skills in the same industry or those with comparable skills in different industries.

38
Q

Trade Union

A

Collection of workers usually in the same or similar industry that collectively bargains for the workforce on issues like fairness of pay, working conditions or benefits.

39
Q

Bilateral monopoly

A

Labour market that includes a trade union and a monopsony

40
Q

Labour market flexibility

A

The ability of workers to move between occupations and indsutries in order to respond to changes in wages and conditions of work.

41
Q

Mobility of workers

A

Ability of workers to move geographically or occupationally to respond to change in wages and conditions of work.