labour market Flashcards
what is the supply of labour determined by
those who want to be employed
what type of demand is labour
derived demand (comes from the demand from what it produces)
what does the downard sloping demand curve show
inverse relationship between how much the workers are paid and how many are employed
what could firms do if wages get too high
switch out production for capital - cheaper and efficient
factors effecting demand for labour
-cheaper substitutes e.g mechanisation
-profit of the firm e.g. AC
-number of firms in the market
-strenght of the economy
calculation for marginal revenue product
MRP = MP x MR
what is the marginal product of labour
additional output each extra unit of labour can produce
what is the marginal revenue of labour
additional revenue derived from each extra unit of labour
inelastic demand for labour
strikes and lower supply increase the wage rate
what effects the elasticity of demand
labour costs as a proportion of total costs
easy switches to substiutes
PED of the product labour will produce
supply of labour
number of people willing to work x hours they can work
non-monetary considerations on supply of labour
how satisified and working conditions of their job
what does the upward sloping labour supply curve show
the proportinal relationship between how much works are paid and how many are willing and able to work
causes of shifts in the supply curve for labour
demographics of the population (school leaving age, immigration)
trade unions (people know their rights can be defended)
taxes and benefits (if too high or low may draw from labour market)
labour market equillibrium
where supply and demand for labour meet, which determines the equillibrium price for labour (wage rate) in a perfectly competitive market
why are wages not flexible
the minimum wage makes wages sticky
e.g during a recession, the wage rate would not go up. instead workers would be sacked.
what contributes to imperfections in the labour market
monopsony power
trade unions
imperfect info
impact of monopsony power
there is only one buyer in the labour market, they have wage rate setting power
they will employ where MC=MRp
impact of trade unions
if push for higher wage above the minimum wage, labour is likely to be more flexible
how do trade unions demand for higher wages
limiting supply - strikes
closing firms
collective bargaining