Labour Market

Question 0

Define equilibrium in total labour market?

Answer 0

When WA=WB

Question 1

What happens in market labour equilibrium?

Answer 1

1) SIGNAL - PB workers see PA workers getting higher wage.
2) INCENTIVE - PB workers realise benefits of PA.
3) RATION - PB workers move to PA.

Question 2

Define derived demand?

Answer 2

Demand for one good which is an input for another good that is being demanded.

Question 3

Define wage?

Answer 3

Price of workers.

Question 4

What affects demand of labour?

Answer 4

Profits of company
Number of firms
Price of other workers (subs + comps)
Advertisement from workers
Fashions (fashionable jobs?)
Expectations (wages rise, therefore contract needed fast?)
Law/legislation (positive discrimination)

Question 5

What affects supply of labour?

Answer 5

Cost (of getting to work, childcare etc)
Productivity (easy to get to work?)
Price of other goods (joint supply - taxi driver and ads) (comp supply)
Climate (can McNally teach in Brazil? Doesn’t speak Spanish so no)

Question 6

What is the national minimum wage?

Answer 6

The legal minimum hourly rate of pay an employer can pay its workers.

Question 7

Advantages of increasing the NMW? (5)

Answer 7

• reduction in exploitation of labour and poverty
• reduction in wage inequality between men and women
• reduction in voluntary unemployment (more incentive to take low paid work)
• increase in labour productivity (workers more satisfied with jobs)
• helps to keep up with cost of living due to inflation

Question 8

Disadvantages of increasing NMW? (3)

Answer 8

• increase in unemployment since firms find it too expensive to employ labour
• increase in inflation since firms CofP rise, so their prices rise too
• ineffective at reducing employment (the poor are often sick+elderly so don’t work anyway, and NMW earners are often not from poor households - often students)