Chapter 6 Flashcards
What is derived demand
Demand for a good or factor of production wanted not for its own sake, but as a consequence of the demand for something else
What is marginal physical product of labour
The addition to a firms total output brought about by employing one more worker
What is the marginal revenue product of labour
The money value of the addition to a firms total output brought about by employing one more worker
What is the elasticity of demand for labour
Proportionate change in demand for labour following a change in the wage rate. The elasticity can be calculated by using the following formula
Proportionate change in quantity of labour demanded /
Proportionate change in wage rate
What is elasticity of supply of labour
Proportionate change in the supply of labour following a change in the wage rate.
Proportionate change in quantity of labour supplied /
Proportionate change in the wage rate
What is average cost of labour
Total wage costs divided by the number of workers employed
What is marginal cost of labour
The addition to a firms total cost of production resulting from employing one more worker
What is a monopsony
There is only one buyer in a market
What is monopsony power
The market power exercised in a market by the buyer of a good or the services of a factor of production such as labour even though the firm is not a pure monopsonist
What is the occupational immobility of labour
When workers are unwilling or unable to move from one type of job to another e.g because different skills are needed
What is geographical immobility of labour
When workers are unwilling or unable to move from one area to another in search of work
What is a trade Union
A group of workers who join together to maintain and improve their conditions of employment including the pay
What is collective bargaining
A process by which wage rates and other conditions of work are negotiated and agreed upon by a union or unions with an employer or employers
What is national minimum wage
A minimum wage or wage rate that must be paid by law psi to employees though in many labour markets the wage rate paid by employers is above the national minimum wage
What is price discrimination
Paying different workers different wage rates for doing the same job
Why would there be a shift of the demand curve of labour?
- a change in labour productivity
- a change in technology, can shift left if technical progress causes firms to substitute labour for capital or shift right if if technical progress make labour more productive in relation to other factors of production
When is demand for labour likely to be relatively inelastic?
- when the relative wage cost only forms a small part of total production costs
- when the demand for a good or service is inelastic
- when it it is difficult to substitute other factors of production in for labour
- in the short run
Factors that effect the supply curve of labour?
- money wage rate
- utility or economic welfare derived from aspects of working -non-monetary benefits
- changes in income
- changes in population
- changes in expectations, e.g less optimistics about future income
What factors determine wages elasticity of supply of labour?
- supply of unskilled labour is usually more elastic than then supply of a particular type of skilled labour
- factors which reduce the occupational and geographical mobility of labour
- supply of labour is likely to be more elastic in the long term
- availability of a pool of unemployed labour increases elasticity
In imperfectly competitive labour markets wage differences in different labour markets are often substantial. reasons for this are:
- Disequilibrium trading, economies are subject to constant change, and labour markets are usually in disequilibrium
- imperfect market information, workers sometimes lack accurate information on rates of pay. Imperfect market information also contributes to occupational and geographical immobility of labour
- discrimination
What are the advantages of the national minimum wage?
- less government support is necessary
- higher motivation of workers
- better working quality
- better chances to get out of poverty
What are the disadvantages of the national minimum wage?
- higher labour costs for companies
- loss of competitiveness
- replacement of workers with machines
- higher unemployment
What several reasons may there be why women earn less than men?
- work predominantly in low paid industries
- discrimination against women in labour markets
- attachment to the labour force is weaker
- higher labour turnover of women also imposes costs on the employer
