Labour Markets

Question 1

What is a labour market

Answer 1

A set of arrangements that allows the buyers and sellers of labour to come into contact
Consists of the demand and supply of labour
Call this a factor market because it is is a market for one of the FOP

Question 2

What does the labour market determine

Answer 2

The price of labour or wage

Question 3

Define derived demand

Answer 3

Demand that comes from the demand for something else

Question 4

What are the determinants of demand for labour?

Answer 4

Productivity of the workforce
Derived demand for labour
Government employment subsidy
A change in the cost of capital equipment

Question 5

Who demands labour

Answer 5

Firms

Question 6

Who supplies labour

Answer 6

Households

Question 7

What affects demand for a product

Answer 7

Substitutes 
Weather
Trends
Price
Income

Question 8

What is the relationship between capital and labour

Answer 8

Capital is slowly replacing labour

Question 9

Define elasticity of demand for labour

Answer 9

The responsiveness of the quantity demanded of labour to changes in the wage rate ( the price of labour )

Question 10

How to calculate elasticity of demand for labour

Answer 10

% change in Qd
________________

% change in wages

Question 11

What is the result of the elasticity of labour

Answer 11

Result is always negative because the wage rate and Qd have a negative relationship

Question 12

What are the determinants of elasticity of demand for labour

Answer 12

Time
The elasticity of demand for the product
The proportion of labour cost to total cost
The availability of substitutes

Question 13

What are the determinants of supply for labour

Answer 13

Changes in population size
Changes to immigration policy
Changes in social attitudes
Changes in WR in other markets
Changes to the tax and benefits system 
Changes to training and education 
Changes to school leaning and retirement age
Social and cultural changes such as attitudes to women working
Changes in power of trade unions

Question 14

Define the elasticity of spilt for labour

Answer 14

The responsiveness of the quantity supplied of labour to changes in the wage rate ( the price of labour )

Question 15

How to calculate elasticity of supply for labour

Answer 15

% change in Qs
________________

% change in wages

Question 16

Determinants of elasticity of supply for labour

Answer 16

Time

Mobility of labour

Question 17

Define wage differentials

Answer 17

The Duffy in wages between workers with different skills in the same industry or between those with comparable skills in different industries or localities

Question 18

What are the causes of wage differentials

Answer 18

Compensating wage differentials 
Skills/qualifications 
Discrimination 
Profitability of different industries 
Inherited privilege 
Trade unions
Labour immobility

Question 19

Define minimum wages

Answer 19

A wage rate below which employers will not pay

Question 20

What are the 2 types of minimum wage

Answer 20

A legal or statutory MW - imposed by the government

A trade union imposed MW ( unions will threaten strikes or other industrial action )

Question 21

What are the advantages of a minimum wage

Answer 21

Improves equity
Labour market incentives
Reduces labour market discrimination
Reduces relative poverty

Question 22

What are the disadvantages of having a minimum wage

Answer 22

Creates unemployment
Reduces international competitiveness
May deter FDI ( foreign direct investment )
Effect on relative poverty is questionable