C.6 The Labour Market Flashcards
Cyclical unemployment
Unemployment caused by the bus cycle.
Actual rate of unemployment - natural rate of unemployment
Natural rate of unemployment
The normal rate of unemployment, consisting of frictional unemployment plus structural unemployement
Frictional unemployment
Short-term unemployment that arises from the process of matching the job skills of workers to the requirements of jobs
Structural unemployment
Unemployment that arises from a persistent mismatch between the job skills or attributes of workers and the requirements of jobs
Efficiency Wage
A higher-than-market wage that a firm pays to motivate workers to be more productive and to increase profits
Job-finding rate
% of unemployed workers who find a job in a given period
Job separation rate
% of employed workers who separate from a job (lose it or quit it) in a given period
Marginal Product of Labour (MPL)
The extra output a firm receives from adding one more unit of labour, holding all other inputs and efficiency constant
Which is stronger in the short run? Sub or income effect
Sub
Sub effect
Real wage increases means leisure is more expensive, so we choose to have less leisure and work more. Makes you supply more hours of labour
Income effect
The effect of change of income on demand for goods. hen real wage increases, you can buy more for working the number of hours. Makes you supply fewer hours of labour
Creative destruction
The process by which new tech destroys existing jobs, but simultaneously creates jobs by making newer and better products elsewhere in the economy
When is the economy considered at full employment?
When the cyclical unemployment rate is zero
Equation for natural rate of umemployment
u^N = s/(s+f)
