Labour market - demand and supplu

Question 1

derived demand d

Answer 1

occurs when the demand for a factor of production arises from the demand for the output it produces

Question 2

marginal revenue product (MRP)

Answer 2

the value of the physical addition to output arising from hiring one extra unit of a factor of production

Question 3

marginal product of labour d

Answer 3

the change in total output arising from hiring one more worker

Question 4

what is the main thing the aggregate (total) demand for labour depends on

Answer 4

the level of economic activity

Question 5

what is an individual firm’s demand for labour based on

Answer 5

price of labour
productivity
price of other factors of production
supplementary labour costs

Question 6

why is there initial returns to employing more workers

Answer 6

increasing returns due to the benefits of division of labour

Question 7

what is the formula for marginal revenue product - MRP

Answer 7

MRP = MP x MR

Question 8

what is the marginal revenue product curve

Answer 8

the demand curve for labour

Question 9

when will the marginal revenue product shift out

Answer 9

if the marginal product of labour increases, if the price of their output rises

Question 10

elasticity of demand for labour

Answer 10

the responsiveness of quantity demanded of labour to a change in the wage rate

Question 11

why is measuring MRP difficult in reality

Answer 11

hard to isolate the contribution to output made by an individual worker

Question 12

formula for elasticity of demand for labour

Answer 12

% change in quantity of labour demanded / % change in wage rate

Question 13

what is on the axes for MRP diagrams

Answer 13

wage rate on y, quantity of labour on x

Question 14

what are the factors that affect the elasticity of demand for labour

Answer 14

time period
availability of substitutes
elasticity of demand for the product
proportion of total cost to labour cost

Question 15

non-monetary factors d

Answer 15

the non-financial rewards to a particular occupation, eg. holidays, leisure time and convenience

Question 16

monetary factors (labour)

Answer 16

the financial rewards to a particular occupation, eg. wage, commission, bonus

Question 17

participation rate / activity rate d

Answer 17

the percentage of the population of working age currently in work or actively seeking work

Question 18

economically inactive d

Answer 18

percentage of the population who are either not in work nor seeking it

Question 19

what are some examples of non-monetary factors (labour)

Answer 19

convenience and flexibility
status
promotion
holidays
perks

Question 20

net advantage d

Answer 20

the overall rewards to a particular occupation, taking into account both monetary and non-monetary factors

Question 21

how do you show net advantage on a graph

Answer 21

it is the supply curve so with more benefits it will move outwards reducing the wage rate workers would be willing to accept

Question 22

unemployment d

Answer 22

number of people of working age who do not currently have a job but are actively seeking work at existing wage rates

Question 23

elasticity of supply of labour d

Answer 23

the responsiveness of quantity of labour supplied to a change in wage rate

Question 24

what factors may influence the supply of labour to particular firms

Answer 24

availability of training
location
level of unemployment
opportunities for overtime

Question 25

what does a change in wage level do to the labour supply curve

Answer 25

causes a movement along its labour supply curve

Question 26

what does the elasticity of supply of labour measure

Answer 26

the responsiveness of the quantity of labour supplied to a change in the real wage rate

Question 27

what does the elasticity of supply depend on

Answer 27

skills required in the job
length of training period
sense of vocation
time period

Question 28

explain the backward-bending supply curve for labour

Answer 28

individual supply curve for labour is this way because it is assumed workers will prefer to work fewer hours as their incomes increase above a certain level

Question 29

income effect (of a wage increase) D

Answer 29

depending on an individual’s target level of income, he or she can work fewer hours for the same overall pay

Question 30

can income and substitution effect work both ways

Answer 30

substitution always works the same way, income can work both ways either encouraging more work or more leisure

Question 31

substitution effect (of a wage increase) d

Answer 31

individuals will tend to choose to work more hours, as the opportunity cost of leisure increases