Labour Market Flashcards
MPP
marginal physical product of Labour
The amount of output produced by each extra worker
MRP
Marginal revenue product of Labour
MRP = MPP x MR
does MPP or MRP = D
MRP = D
Elasticity of demand for Labour
How a change in wage affects the demand for Labour
Substitutes for Labour
- Other labourers (more elastic unskilled leads to easier work)
- machines
Percentage of total cost on elasticity of labour
if wages make up a small % of total cost than on increase I % cost of labour can increase hugely and sill represent such a small % of Total cost hence a low % leads to low elasticity of demand.
Here demand is unresponsive to a change in price
Inelastic demand
Time as a factor in labour marker elasticity
Short Run Wages can increase and are inelastic
This is because it takes time to hire and train more staff
therefore an inelastic demand
In the LR there will be elastic wages as labour will be unresponsive
3 Main factors impacting labour market elasticity
substitues
% total cost
time
Elasticity of labour demand on wage rate
inelastic- increase in wages
elastic- decrease in wages
Elasticity of labour supply
Some jobs have inelastic supply
hearty surgeons take long time for an increase in price for jobs where it is easy to adopt a role
Skills and qualifications as a factor in increasing labour supply
the level of skill needed to enter a market
supply is responsive to changes in wage
increase in skills and qualifications many increase inelasticity
3 factors affecting labour supply
Skills and qualifications
U/P
Time
Unemployment effecting labour supply
with high U/P labour supply is elastic
Inelastic supply from increased u/p leads to higher wages
Time affecting the supply of labour
supply will be inelastic to SR
Less time for workers to train/ apply hence supply is unresponsive
7 shifts in the Labour Market
1- Derived Demand
2 productivity
3 capital cost
4 Migration
5 income tax and benefits
6 non pecuniary benefits
7 education and training
Derived Demand shifts in Labour Market
if demand increases AS labour is derived demand labour demand will increase wages
Derived demand
demand for goods and services leads to second and demand for a fop
productivity
when productivity increases the reward for labour income
could lead to more demand for L as as reward increased
reward could decrease labour as means less workers
capital cost
if capital decreases in cost (self checkout machines)
if capital decreases in cost then firms will shift to purchasing capital
Migration to supply curves
increase in labour supply if workers are migrating in
supply shifts right
Income tax and benifits and labour supply
The uk government decreases benefits
labour supply increases
increase in benefits leads to decrease in supply
low tax- supply of high skilled workers decrease as need to work decrease
could increase if people would like to earn more money and hence there is a lower opportunity cost to work
Non pecuniary benefits
benefits of a jobs other than tour pay
-holidays
- job satisfaction
Non pecuniary benefits as a factor influencing labour supply
increase in those benefits makes job more appealing, labour supply moves right which increases employment
wage differentials
economic factors leading to different unequal wage rates
