labour markets

Question 1

derived demand meaning

Answer 1

demand of labour comes from demand of what it produces

Question 2

MRPL- marginal revenue productivity of labour

Answer 2

extra revenue generated when an extra unit of labour is employed

Question 3

what does MRPL show

Answer 3

inverse relationship between wage rate and number of people employed
higher MRPL higher demand for workers
law of diminishing marginal productivity- initially MRPL of workers will increase with employment but after the optimum it will decrease

Question 4

equation for MRPL

Answer 4

MRPL = marginal output x price

Question 5

factors influencing demand for labour

Answer 5

demand for product- derived demand
productivity of labour
substitutes for labour
wage rate
profitability of firm- more profits more employment

Question 6

WED- wage elasticity of demand

Answer 6

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

Question 7

factors effecting WED

Answer 7

labour cost from total % of costs- high=more elastic
ease and cost of substitution= more elastic when firms can substitute
PED of final product- inelastic ped leads to wages being passed on so wed inelastic

Question 8

supply of labour meaning

Answer 8

number of workers willing and able to work at the current wage rate multiplies by the hour they can work

Question 9

factors affecting the supply of labour

Answer 9

demography- older=retirement younger=more school
migration
non monetary benefit
leisure time
trade unions
taxes and benefits
training/ barriers to entry or exit

Question 10

wage elasticity of supply WES

Answer 10

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

Question 11

factors effecting WES

Answer 11

more qualifications and skills more inelastic
length of training- short is elastic long inelastic
immobility of labour more inelastic

Question 12

backwards bending supply curve

Answer 12

at low wages individuals see work as more attractive than leisure but after a certain point income effect is greater and leisure is more attractive than working so quantity of labour decreases

Question 13

market failures in labour markets

Answer 13

geographical immobility- when factors of production cannot move between areas

occupational immobility- when factors of production cannot change their use

Question 14

perfect competition wages

Answer 14

wages are determined by demand and supply and all workers being paid the same otherwise employees would all move to the region that pays the most

Question 15

monopsony power and wages

Answer 15

sole employer of labour
they are able to reduce the wage of workers and it won’t be equal to their MRPL and what they should be paid
the quantity employed will reduce compared to the competitive quantity

Question 16

trade unions and monopsony

Answer 16

trade unions increase wages of workers through high collective bargaining power
they also improve the quality of work and increase quantity employed

but it may not meet the competitive quantity and wage rate

Question 17

wage differentials meaning

Answer 17

workers paid different amounts even in the same job

Question 18

causes of wage differentials

Answer 18

education, skill, training, qualification
pay gaps- between skilled and not skilled
gender
discrimination- gender, race, age, disabilities

Question 19

con of migration

Answer 19

rising work force=lower wages=displace the original worker= structural unemployment=regional decline=increase in poverty and inequality

Question 20

national minimum wage meaning

Answer 20

wage rate set above the equilibrium

Question 21

maximum wage meaning

Answer 21

wage rate set bellow the equilibrium

Question 22

effects of max wage

Answer 22

redistribution of income so more income equality
disincentivise innovation less demanding work

Question 23

public sector wage setting

Answer 23

workers employed by gov
wages not determined by supply and demand but by gov
earn less than private sector as info gaps, control inflation

Question 24

policies to tackle market immobility

Answer 24

increase union power
regualtion
high tax rates so high UCS
training/ vocational courses
infrastructure improvements
increase supply of housing to make it cheaper
close information gaps
investing out of London
flexible work patterns