Labour supply

Question 1

What is labor force?

Answer 1

All those over 15 years of age who are employed, actively, seeking work, or expecting recall from a layoff

Question 2

Who are the unemployed?

Answer 2

Those in the labour force who are not employed for pay

Question 3

How can people leave the labour force?

Answer 3

1. by retiring 2. deciding against taking or seeking work for pay

Question 4

What is the unemployment rate?

Answer 4

The ratio of those unemployed to those in the labor force

Question 5

What is labour force participation rate?

Answer 5

This is the proportion of a country’s working-age population that engages actively in the labour market, either by working or looking for work

Question 6

What does it mean when the unemployment rate is around 5%?

Answer 6

The labour market is considered tight (nearing full employment). it means there are jobs in abundance but very few people for work

Question 7

What does it mean when the unemployment rate is 7% and above?

Answer 7

This means the labor market is loose. There are a lot of workers in the system but very few jobs

Question 8

What is work?

Answer 8

It is any economic activity, performed by the respondent that contributes to the economic production of goods and services

Question 9

What does it mean to be currently unemployed?

Answer 9

This is when a person is not engaged in any work, has no attachment to a job or business, reported that he/ she was available for work and had taken some specific steps to look for work

Question 10

Who are those classified under time-related underemployment?

Answer 10

these are persons whose total actual hours of work are less than 35 hours

Question 11

What is labour underutilization?

Answer 11

The part of the population which has labour slack, low earnings and skill mismatch among the employed population

Question 12

Who are the leading actors in the labor market?

Answer 12

1. workers
2. firms
3. government

Question 13

Why is the labor supply curve often upward sloping?

Answer 13

This is because persons who want to maximize their well-being will tend to supply more time and more effort to those activities that have a higher payoff

Question 14

What generates the economy’s labor demand?

Answer 14

The hiring and firing decisions of millions of employers generates the economy’s labor demand

Question 15

How is equilibrium attained in a free-market economy?

Answer 15

When supply equals demand

Question 16

How does government control the exchanges in the labor market?

Answer 16

1. impose taxes on a worker’s earnings
2. subsidize the training of more workers
3. impose a payroll tax on firms
4. increase enrollment in universities

Question 17

What are the two categories that labour supply decisions can be divided into according to worker ?

Answer 17

1. Decisions about whether to work at all and if so how long

2. deals with the questions that must be faced by person who has decided to seek work for pay

Question 18

What is the typical framework that economists use to analyze labour supply behavior?

Answer 18

neoclassical model of labour-leisure choice

Question 19

What happens with the neoclassical model of labour-leisure choice?

Answer 19

In this framework, individuals seek to maximize their wellbeing by consuming goods (such as food, cars and homes) and leisure.

Question 20

What is the opportunity cost of leisure?

Answer 20

The cost of spending time do a leisure activity instead of working. The cost of spending an hour watching television is basically what one could earn if one had spent that hour working.

Question 21

What is marginal utility of leisure?

Answer 21

the change in utility from an additional hour devoted to leisure activities,
holding constant the amount of goods consumed.

Question 22

What is marginal utility of consumption?

Answer 22

the change in utility if the individual consumes one more cedi worth of goods, holding constant the number of hours devoted to leisure activities

Question 23

The worker’s consumption of goods and leisure are constrained by what?

Answer 23

Her time and income

Question 24

What is another name for the absolute value of the slope of the indifference curve is?

Answer 24

Marginal rate of substitution

Question 25

What happens to hours of work when non labour income changes?

Answer 25

An increase in non-labor income leads to a parallel upward shift in the budget line, moving the worker from P0 to point P1. If leisure is a normal good, hours of work fall, if leisure is an inferior good, hours of work increase

Question 26

The impact of the change in non labour income (holding wages constant) on the number of hours worked is called?

Answer 26

Income effect