6.2 influences on the supply of labour to different labour markets Flashcards
what does the labour supply curve show?
the labour supply curve shows how much labour all the workers in the labour market plan to supply at different wage rates
what influences the individual supply curve of labour?
the choice between work or leisure,
this can be influenced by the substitution effect and the income effect
what is the substitution effect
as wage rate rises, the opportunity cost of labour becomes greater so workers are incentivised to substitute leisure time for more work
what is the income effect, how can it be positive or negative?
positive as wages go up, incomes will rise at the same time so workers work more.
negative if worker has a target income, so if wages rise above target income level workers will work less
what is the shape of the individual labour supply curve, what are the labels, draw it
backwards c shape, bottom hours worked, top real wage
what is the monetary advantage of employment?
wages are earnt which can buy goods/services
what are the non monetary advantages of employement?
Economic welfare derived form aspects of working this is;
Job satisfaction and job dissatisfaction, if workers enjoy job they are willing to earn lower wages intern for higher satisfaction. if workers don’t like work or is dangerous they are compensated by higher wages which supply’s incentives for them to work
job security may supply workers with holidays, sick pay, promotion prospects, nice working environment etc.
how will a worker maximise their personal welfare
when;
utility of welfare from the last unit of money earned = utility or welfare from the last unit of leisure time sacrificed
what is a rise in wage usually accompanied by?
should lead to an increase in the supply of labour
what non monetary factors could shift the labour supply curve?
improvements that will lead to a shift to the right; job security, promotion prospects, good working conditions and holiday entitlement,
what are other factors that can shift the supply of labour?
change in income, could work either way if a person values leisure time as a inferior good, an increase in income could cause a higher supply in labour, or if a person values leisure time supply of labour will shift to the left
change in population, rise in immigration increases the supply of labour (vis versa) + fall in working age will reduce labour supply
change in expectations, older people expect to live longer and expect pensions to decrease, could increase labour supply, a rise in people attending higher education tends to reduce labour supply
what is The elasticity of supply of Labour and what is the equation for it
the proportionate change in supply following a change in the wage rate
proportionate change in quantity of labour supplied/ proportionate change in the wage rate
what factors determine/ affect the elasticity of supply of labour
skill level of workers, (unskilled more elastic as training is short so replaceable)
labour mobility (if labour force suffers geographical/occupational immobility of labour the less elastic the labour force is)
time frame long run always more elastic
unemployment (higher unemployment rate more elastic vis vera)
