Labour Market REv Flashcards
Definition Labour Demand Curve
The labour demand curve shows how many workers will be employed at a given wage rate over a given time
What kind of Demand is Labour?
Demand for labour is derived from the demand for products
MRP Definition
additional revenue generated when a worker is hired
MRP equation
MRP=MPP x MR
To which point is a profit max. firm hiring
Firms will hire labour until MRP=MCL
Critique on Marginal Revenue Product
measuring productivity, teamwork, self employed, imperfect labour markets (trade unions)
Which factors might shift the labour demand curve?
MRP=MPP x MR
Changes in final price, demand, labour productivity, price of capital
Define Elasticity of Labour Demand
The responsiveness of labour demanded given a change in the wage rate
What determines the elasticity of Labour?
SECT Substitutability of Labour Elasticity of demand for the product Cost of Labor as a % of total cost Time period
Factors of production
Land Labour Capital Entrepreneurship
What is the opp cost to work
Leisure time
Positive Income effect
Workers want to work more in order to earn more money,
negative income effect
Increase in Wage rate fails to incentivizes workers to work more because they have reached a target income
Substitution effect
Always positive, more money will always encourage people to join the work force
(especially consider discouraged workers)
5 SHIFTERS OF LABOUR SUPPLY
Wage on offer in a substitute occupation (bus/lorry)
!Barriers to entry (qualifications)
Non monetary characteristics (anti social hours)
!Improvements in occupational mobility of labour
!Size of the working population (immigration)
