Labour market Flashcards
What is the Labour force?
The total number of people who are emplyed & unemployed. They are economically active or are seeking for work
How do you measure the labour force? ( participation rate)
Labour force x 100= size of working age population
What is wage rate determination?
Price of labour , determined by the supply and demand of labour in competitive markets.
What are features of a perfectly competitive labour market?
There are many potential workers/ buyers of labour (employees). Labour is homogeneous. Perfect information. Each participant is a wage taker. No government intervention
What is the wage rate?
The rate of supply of labour that varies in direct relationship with wage
What factors influence the supply of labour to shift?
Education and training, income tax, strength of trade unions, migration, wages in other industries, non-financial factors( working conditions, higher industrialised opportunities)
What is WES?
The responsiveness of quantity supplied of labour to a change in the wage rate
What is the equation of WES?
% change in quantity supplied of labour/% change in wage rate
What factors influence the wage elasticity of supply?
The skill of the job, length of training, nature of the job, vocational element, time
What might cause market failure in labour markets?
Geographic immobility, occupational mobility
What is the Marginal revenue product (MRP)theory?
Measuring the value of the output of an additional worker and therefore the demand for the worker
How do you calculate MPR?
MRP=MPP (Marginal physical product) X P (price of the product)
What factors influence the demand curve for labour?
Changes in the final product
changes to replace capital in the long run
level of education
increased government regulation
What is wage elasticity of demand?
Measures the responsiveness of the quantity demanded of labour to a change in the wage rate
What is the formula for WED?
% change in QD for labour/ % change in wage rate
What factors determine the WED?
S-Substitutability of capital for product
E-Elasticity of demand for the product
C-Cost of labour as a percentage of total cost
T-Time period
What are reasons for market inflexibility?
Occupational Immobility
-Lack of skills/qualifications
-Reluctant to retrain
-Information failure ( ie info for new jobs)
Geographical immobility
At which point will firms hire workers?
MRP=W (Marginal cost of labour)
What are perfectly competitive labour markets?
A market where there is full information about work . no barriers to entry, wage is determined by supply and demand
What is an imperfectly competitive labour market?
Where workers only have some control over wages and conditions , instead of wages being set by supply and demand
What is a monopsony in the labour market?
The sole employer in a given industry
What are the characteristics of monopsonies in the labour market?
-wage maker, maximising revenue (MR=0) of workers and will hire until MRP=MC
