labour market Flashcards
marginal revenue product
marginal physical product X marginal revenue
how firms determine how many workers to hire
firms will hire up until MRP = wage = MC
why is there an inverse relationship between wage and quantity
SR - law of diminishing returns
LR - substitutability of labour and capital
criticism of the MRP theory
-how to measure productivity
-teamwork makes it difficult to measure individual productivity
-the self emplyed
-imperfect labour markets (trade unions)
factors that shift demand for labour
PDPC
-change in final PRICE of the product labour is making
-change in DEMAND for final product
-changes in labour PRODUCTIVITY
-changes in price of CAPITAL
elasticity of labour demand curve
measures the responsiveness of labour demanded given a change in the wage rate
factors affecting elasticity of labour demanded
Substitutability of capital for labour
Elasticity of demand for the product
Cost of labour as a % of total costs
Time period
individual labour supply curve
-key choice between work and leisure
there is an opportunity cost
income effect
risse in incomes as wages rise but with the potential for individuals reaching a target income (work less)
can be positive or negative
substitution effect
as wages rise the opportunity cost of leisure time increases providing on incentive to work, always positive
shifts in supply of labour
-wage on offer in substitute occupations
-barriers to entry/exit
-Non-monetary characteristics of the job
-improvements in occupational mobility of labour
-overtime
-size of working population
-value of leisure time
elasticities of labour supply curve
measures the responsiveness of the labour supplied given a change in wage rate
factors that shifts elasticities of labour supplied
-nature of skills required in job
-length of traning period
-vacation
-time
characteristics of a perfectly competitive labour market
-many potential worker and employers
-labour is homogenous
-there is perfect information
-firm are wage takers
-no barriers to entry/ exit
labour market imperfections
-labour is not homogenous
-non monetary considerations
-labour is not perfect mobile
-trade unions and supply restrictions
-monopsonies and wage setting ability
monopsony
