Labour Market Flashcards
What is Labour?
A factor of production comprising the effort of workers to create goods and services
What is a sub-market?
Part of the market with unique characteristics
Derived Demand
Where the demand for a factor of production or good derives not from the factor or good itself, but from the goods or services that it provides
What is the Marginal Physical Product of labour (MPPL)
The additional quantity of output produced by an additional unit of labour input (extra output made by extra worker)
What is marginal revenue product of labour (MRPL)?
The additional revenue recieved by a firm as it increases output by using an additional unit of labour input
The equation for MRPL?
MPPL X MR
What is the marginal revenue product theory?
That the demand for labour depends upon balancing the revenue that a firm gains from employing an additional unit of labour against the marginal cost of that unit of labour
What is wage elasticity of demand for labour? (WED)
A measure of the sesitivity of quantity of labour demanded to a change in the price of wages
What is the equation for WED?
%change in quantity of Labour demanded/ %change in wages
What is labour productivity?
A measure of output per hour worked
What is unit labour cost?
The average cost of labour per unit of output
Factors affecting the MOVEMENT for the demand for labour?
Price of labour (wage rate)
Factors affecting the SHIFT in demand for labour?
- Change in the demand for the products workers produce
- Change in the price of the good workers produce
- Change in an employment subsidy
Factors affecting wage elasticity of demand for labour?
- Time-demand for labour is more elastic in the long run as new workers can be trained
- Substitutability-the extent to which labour can be substituted by capital (machines)
- PED of product - the more price elastic demand for the product, the more elastic the demand for labour because wage costs are passed on to the consumer by increased prices
A profit maximising firm chooses labour input such that…
…the marginal cost of labour is equal to the marginal revenue product of labour (MCL=MRPL)
What does the position of the firm’s labour demand curve depends on factors tht affect the price of a firm’s product and influence the MPPL such as?
- Technology
- Efficiency
In a perfect competitive market what cannot the firm influence?
Cannot influence the market wage, and can get as much labour as required at the market rate, so MCL is horizontal
What is the equation for WED?
WED= %change in quantity of labpur demanded/%change in wages
What is Labour productivity?
Is an average measure of output produced by workers
What are the main influences on labour productivity?
- Skills and training of workforce
- Availabilityof complementary factor inputs (capital and technology)
- Organisation of production process (e.g. division of labour)
What are Non-pecuniary benefits?
Benefits offered to workers by firms that are no financial in nature
What is the income effect?
The change in demand for a good or service caused by a change in a consumer’s purchasibg power
What is the substitution effect?
As prices rise - or income decreases - consumers will replace more expensive items with cheaper alternatives
What are transfer earnings?
The mininmum payment required to keep a factor of production in its present use