Labour Markets & Gov Intervention

Question 1

Is labour a derived demand?

Answer 1

Yes

Question 2

Demand for labour: What is on the axis of a demand for labour diagram?

Answer 2

Y- axis : Wage rates
X- axis : Number of workers employed

Question 3

Demand for labour: What type of correlation does the demand curve have

Answer 3

Negative correlation
Wages rates have an inverse relationship with number of employed workers

Question 4

Demand for labour: What factors make the demand curve downward sloping?

Answer 4

1. Demand for product
2. Wage rates
3. Productivity of labour
4. Substitutes of labour
5. How profitable the firm is
6. Number of firms in the market

Question 5

Supply of labour: How is the supply of labour calculated?

Answer 5

The supply of labour is calculated by the number of workers willing and able to work at the current wage rate, multiplied by the number of hours they can work.

Question 6

Supply of labour: What factors affect the supply of labour?

Answer 6

1. Migration
2. Wage rates
3. Advantages of work
4. Leisure time
   5.Taxes and benefits
5. Trade unions

Question 7

What are the 5 main types of market failure in labour markets?

Answer 7

1. Occupational/Geographical immobility
2. Skills gaps
3. Inequality and wealth poverty
4. Monopsony power of employers
5. Discrimination

Question 8

What could be an impact of migration on labour markets?

Answer 8

1. More competition to get a job , increasing the supply of labour causing wages rates to lower
2. Migrants tend to bring high skill to the domestic workforce , which can increase productivity and increase the skillset of the labour market

Question 9

How can the Government intervene?

Answer 9

1. Maximum and minimum wages
2. Public sector wages setting
3. Regulation
4. Trade union power
5. Training
6. Welfare payments and tax rates

Question 10

Give 6 ways the Government could intervene to influence competition?
(Market structures)

Answer 10

1. Deregulation and privatization
2. Profit regulation
3. Quality standard checks
4. Fines
5. Maximum and minimum prices
6. Competitive tendering for government contracts

Question 11

Give 2 ways the Government could intervene to protect suppliers and employees?

Answer 11

1. Restrictions on monospony power
2. Nationalisation