7 - the labour market: demand and supply Flashcards
derived demand
occurs when the demand for a factor of production arises from the demand for the output it produces
theory of marginal productivity
key theory underpinning the demand for labour
marginal revenue product (MRP)
the value of the physical addition to output arising from hiring one extra unit of production
marginal product of labour
the change in total output arising from hiring one more worker
elasticity of demand for labour
the responsiveness of quantity demanded of labour to a change in the wage rate
economically inactive
the percentage of the population who are either not in work nor seeking it
participation rate/activity rate
the percentage of the population of working age currently in work or actively seeking work
monetary factors
the financial rewards to a particular occupation, e.g wage, commission, bonus.
non-monetary factors
the non-financial rewards to a particular occupation, e.g holidays and leisure time
net advantage
the overall rewards to a particular occupation, taking into account both monetary and non-monetary factors.
unemployment
the number of people of working age who do not currently have a job but are actively seeking work at existing wage rates
elasticity of supply of labour
the responsiveness of quantity of labour supplied to a change in wage rates
backward-bending supply for labour
the individual labour supply curve is thought to be this shape because it is assumed workers will prefer to work fewer hours as their income increases above a certain level
income effect (of a wage increase)
depending upon an individuals target level of income, he or she can work fewer hours for the same overall pay
substitution effect (of a wage increase)
individuals will tend to choose to work more hours, as the opportunity cost of leisure increases
