Labour Market

Question 1

define wage rate

Answer 1

the amount of money paid to workers for their services over a period of time

Question 2

what is derived demand?

Answer 2

demand that arises because there is demand for another good

Question 3

What are the factors affecting the demand for labour? (5)

Answer 3

• Wage rate
• demand for the product (derived demand)
• availability of substitutes
• productivity of labour
• other employment costs

Question 4

What is the relationship between wage rate and demand for labour?

Answer 4

Inverse relationship, as wage increases quantity of the demand for labour decreases as this increases costs for firms and therefore reduces profit margins

Question 5

Demand for the product

Answer 5

• The demand for labour is said to be a derived demand.
• The demand for labour is derived from the demand for the goods and services supplied by firms and public sector organisations.

Question 6

AVAILABILITY OF SUBSTITUTES

Answer 6

The demand for labour may be affected by the cost and availability of substitutes for labour.
For example, in many organisations, it is possible to
replace people with machines. If firms believe that machines are more efficient and cheaper than people, they will probably substitute people with machines.
As technology advances the opportunities for replacing labour with machines seem to increase.
Furthermore machines more productive less human error and avoid payments for sick leave etc.

Question 7

PRODUCTIVITY OF LABOUR

Answer 7

The productivity of labour may also affect demand. If every worker is able to produce more output, demand for workers is likely to increase.
This is because production becomes more profitable, provided the extra output can be sold.

Question 8

Other employment costs

Answer 8

The demand for labour may also be affected by other costs linked to employing
labour. These include national insurance contributions (NICs), which are paid to
the government when employing a worker in some countries; recruitment and
selection costs; the costs of pensions; perks such as a company car, private
health insurance and free meals; training; sick pay; maternity and paternity pay;
holiday pay and the provision of childcare facilities.
Changes in these factors will have an effect on the demand curve for labour.

A04 - these can be reduced/avoided with machinery

Question 9

What are the factors affecting supply of Labour?

Answer 9

School-leaving age 
Retirement age 
Age distribution / aging population
Female participation 
Migration 
Skills & qualifications 
Labour mobility 
Population size