Labour market - demand and supplu Flashcards
derived demand d
occurs when the demand for a factor of production arises from the demand for the output it produces
marginal revenue product (MRP)
the value of the physical addition to output arising from hiring one extra unit of a factor of production
marginal product of labour d
the change in total output arising from hiring one more worker
what is the main thing the aggregate (total) demand for labour depends on
the level of economic activity
what is an individual firm’s demand for labour based on
price of labour
productivity
price of other factors of production
supplementary labour costs
why is there initial returns to employing more workers
increasing returns due to the benefits of division of labour
what is the formula for marginal revenue product - MRP
MRP = MP x MR
what is the marginal revenue product curve
the demand curve for labour
when will the marginal revenue product shift out
if the marginal product of labour increases, if the price of their output rises
elasticity of demand for labour
the responsiveness of quantity demanded of labour to a change in the wage rate
why is measuring MRP difficult in reality
hard to isolate the contribution to output made by an individual worker
formula for elasticity of demand for labour
% change in quantity of labour demanded / % change in wage rate
what is on the axes for MRP diagrams
wage rate on y, quantity of labour on x
what are the factors that affect the elasticity of demand for labour
time period
availability of substitutes
elasticity of demand for the product
proportion of total cost to labour cost
non-monetary factors d
the non-financial rewards to a particular occupation, eg. holidays, leisure time and convenience
monetary factors (labour)
the financial rewards to a particular occupation, eg. wage, commission, bonus
participation rate / activity rate d
the percentage of the population of working age currently in work or actively seeking work
economically inactive d
percentage of the population who are either not in work nor seeking it
what are some examples of non-monetary factors (labour)
convenience and flexibility status promotion holidays perks
net advantage d
the overall rewards to a particular occupation, taking into account both monetary and non-monetary factors
how do you show net advantage on a graph
it is the supply curve so with more benefits it will move outwards reducing the wage rate workers would be willing to accept
unemployment d
number of people of working age who do not currently have a job but are actively seeking work at existing wage rates
elasticity of supply of labour d
the responsiveness of quantity of labour supplied to a change in wage rate
what factors may influence the supply of labour to particular firms
availability of training
location
level of unemployment
opportunities for overtime
