labour market Flashcards
demand for labour meaning
Demand is the different quantities of workers that firms are willing and able to hire at different wages at a given time period
what type of relationship
There is an inverse relationship between wage and quantity of labour demanded
whar is the demand for labour based on
the revenue earned from the output produced called MRP
Firms will demand labour up where the MRP=MC which is the profit maximizing amount to QL to employ
what type of demand is the demand for labour
derived demand
what is marginal revenue product
The additional revenue generated by an additional worker (resource)
what does this equal to in terms of perf comp
the MRP equals the MP of the resource times the price of the product
how to calc MRP
change in total revenue/ change in inputs
whats an example of derived demand
Gov wanting to build 1.5 million houses- to build these there will be a derived demand for labour in order to get these built.
what is the marginal resource cost
The additonal cost of an additional rescource (worker)
whats the MRC formula
change in total costs/ change in inputs (change in workers)
what does this equal to in terms of perf comp
the MRC equals the wage set by the market and is constant
when will firms demand labour up to
where the MRP=MC which is the profit maximizing amount to QL to employ
what is profit maximization
MRP=MCL
what happens before q1
mrp is greater than mcl- stop producing before q1 the next worker will give higher productivity and they may miss out on that if they don’t continue to hire workers n mcl
what happens after q1
mcl is greater than mrp
the firm is no longer performing at profit maximisation and would be losing more than gaining by hiring workers
why does mrp reach its peak
specialisation
are factors fixed or variable in SR
at least 1 is fixed
are factors fixed or variable in LR
(all factors are variable – no diminishing marginal returns) can substitute capital for labour (and visa versa)
is change in wage a shifter
no- just like price isn’t a shifter
just movement along the curve
what happens on diagram when wage rates increase- extension or contraction
If the wage rate rises then there will be an contraction as employers don’t want to pay as much to hire workers- less willing and able
what happens on diagram when wage rates decrease- extension or contraction
Wage rate falls then there will be an extension as workers are more willing and able to hire labour
who is consuming in the labour market
firms
whose offering in labour market
labour
what is human capital
The economic value of a workers experience of skills. Can include assets like education, training, intelligence, skills, health, and other things employers value such as loyalty and punctuality
what is economic rent
the extra income someone gets over the amount they expect
what is transfer earnings
minimum payment necessary to prevent a factor of production moving to a different use.
what is wage determination
the value that a worker adds to the firm which employs them
what is this value
mrp
what are factors that influence changes in wage rates
increase in l(abour) demand
decrease in l demand
increase in l supply
decrease in l supply
