9. Labour Markets - Labour Supply Elasticity

Question 1

What is the elasticity of labour supply?

Answer 1

The responsiveness of labour supplied given a change in the real wage rate

Question 2

What would an elastic or inelastic labour supply mean?

Answer 2

Elastic - the proportional change in the labour supplied is greater than the proportional change in real wageInelastic - the proportional change in the labour supplied is less than the proportional change in the real wage

Question 3

What are the 4 determinants of elasticity of labour supply?

Answer 3

1. Nature of the skills required by the job2. Length of the training period3. Vocation4. Time

Question 4

How may the nature of the skills needed for a job affect the elasticity of labour supply?

Answer 4

If you need very advanced, specific skills people won’t be able to enter an industry even if wages rise - inelastic labour supply (& vice versa)

Question 5

How may the length of the training period affect the elasticity of labour supply?

Answer 5

If there are very long training periods workers from other areas are less likely to flock into an industry as wages rise bc the training period is unattractive - inelastic labour supply (& vice versa)

Question 6

How may vocation affect the elasticity of labour supply?

Answer 6

Vocational jobs like teaching - wages fall - there isn’t a mass exodus of teachers leaving the industry - they work for the love of the job not monetary benefits - vocational jobs are generally wage inelastic (& vice versa)

Question 7

How may time affect the elasticity of labour supply?

Answer 7

In the s-run labour supply is fairly inelastic - ppl have to give notice before they can leave - some may think its only a temporary change etcIn the l-run labour supply is elastic bc ppl can move in and out of professions far more easily