labour market

Question 1

what is the supply of labour determined by

Answer 1

employees and individuals

Question 2

what type of demand is labour

Answer 2

derived demand - demand for labour comes from the demand of what it produces

Question 3

marginal productivity theory

Answer 3

states that the demand for labour is dependent on the marginal revenue product

Question 4

marginal revenue product

Answer 4

is the increase in total revenue to a firm resulting from hiring an additional unit of labour

Question 5

elasticity of demand for labour

Answer 5

measures how responsive the demand for labour is when the market wage changes

Question 6

determinants of the elasticity of the demand for labour

Answer 6

• how much labour costs - higher the costs the more elastic the demand
• easier it is to substitute factors- more elastic labour firms can switch to cheaper forms of production
• PED of product - more price elastic the product the more price elastic the demand for labour

Question 7

determinats for the demand of labour

Answer 7

• the wage rate
  when wages get higher firms may switch to capital as it is cheaper than labour
  inverse relationship between how much the worker is paid and the number of workers employed
• demand for products
• productivity of labour
• how profitable the firm is
• the number of firms in the market
• substitutes for labour
  if there are substitutes such as capital this shifts the demand f=curve for labour to the left

Question 8

supply of labour equation

Answer 8

number of workers able to work x number of hours

Question 9

supply of labour is affected by

Answer 9

• the wage rate
• demographics of the population
• migration
• advantages of work
• leisure time
• trade unions
• taxes and benefits
• training

Question 10

what do trade unions do

Answer 10

aim to protect workers secure jobs improve working conditions and try to increase wage rate

Question 11

what happens if trade unions try to increase wage rates to much

Answer 11

firms may no longer be able to afford to employ workers. this could cause them to close down or reduce number of employees

Question 12

what is the national minimum wage

Answer 12

the minimum pay per hour almost all workers are entitled to

Question 13

where is the NMW set

Answer 13

above the free market price

Question 14

advantages of NMW

Answer 14

• yield positive externalities
  -increase the standard of living and provides incentive for people to work
• government can make extra tax revenue

Question 15

disadvantages of NMW

Answer 15

• could make it harder for young people to get a job because of lack of experience firms will not hire as NMW is already high
• can make the country less competitive as they cannot compete with countries with lower wages

Question 16

reasons for discrimination in the labour market

Answer 16

formal education
- on average those with a degree earn more than those with a levels

skills qualifications and training
- jobs which require training and education offer higher wages

pay gaps
- wage gap between skilled and unskilled workers increases

wages and skills
- more skilled workers produce a higher output

gender
-women still earn less then men on average this could be due to career breaks
-women also face discrimination when it comes to promotions on higher paying jobs

discrimination
- workers can be discriminated on age, gender, ethnicity and disabilities