Labour Market Elasticities Flashcards
What are the three factors that affect how elastic demand for labour is
Substitute
% of total cost
Time
Easy to substitute means that demand will be
Elastic
Hard to substitute means that demand will be
Inelastic
If happens if wages make up a small % of total cost…
Increase in wage will have a small impact so demand for labour will be unresponsive and inelastic
If happens if wages make up a small % of total cost…
Increase in wage will have a large impact so demand for labour will be responsive and elastic
In the short run firms dont have enough time to search for substitutes…
Firms wont be able to respond much so demand for labour will be inelastic
In the long run firms have enough time to search for substitutes…
Firms will be able to respond much so demand for labour will be elastic
What are the factors that determine the elasticity supply of labour
Skills and qualifications
Unemployment levels
Time
Few skills/qualification needed means that supply will be
Supply will be elastic
When unemployment is high supply is
Responsive meaning supply is elastic
When unemployment is low supply is
Supply is unresponsive so supply is inelastic
In the short run if wages increase supply will be
Inelastic because there is very little time to apply and train for the job
