Labour supply Flashcards
What is labor force?
All those over 15 years of age who are employed, actively, seeking work, or expecting recall from a layoff
Who are the unemployed?
Those in the labour force who are not employed for pay
How can people leave the labour force?
- by retiring 2. deciding against taking or seeking work for pay
What is the unemployment rate?
The ratio of those unemployed to those in the labor force
What is labour force participation rate?
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
What does it mean when the unemployment rate is around 5%?
The labour market is considered tight (nearing full employment). it means there are jobs in abundance but very few people for work
What does it mean when the unemployment rate is 7% and above?
This means the labor market is loose. There are a lot of workers in the system but very few jobs
What is work?
It is any economic activity, performed by the respondent that contributes to the economic production of goods and services
What does it mean to be currently unemployed?
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
Who are those classified under time-related underemployment?
these are persons whose total actual hours of work are less than 35 hours
What is labour underutilization?
The part of the population which has labour slack, low earnings and skill mismatch among the employed population
Who are the leading actors in the labor market?
- workers
- firms
- government
Why is the labor supply curve often upward sloping?
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
What generates the economy’s labor demand?
The hiring and firing decisions of millions of employers generates the economy’s labor demand
How is equilibrium attained in a free-market economy?
When supply equals demand
How does government control the exchanges in the labor market?
- impose taxes on a worker’s earnings
- subsidize the training of more workers
- impose a payroll tax on firms
- increase enrollment in universities
What are the two categories that labour supply decisions can be divided into according to worker ?
- 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
What is the typical framework that economists use to analyze labour supply behavior?
neoclassical model of labour-leisure choice
What happens with the neoclassical model of labour-leisure choice?
In this framework, individuals seek to maximize their wellbeing by consuming goods (such as food, cars and homes) and leisure.
What is the opportunity cost of leisure?
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.
What is marginal utility of leisure?
the change in utility from an additional hour devoted to leisure activities,
holding constant the amount of goods consumed.
What is marginal utility of consumption?
the change in utility if the individual consumes one more cedi worth of goods, holding constant the number of hours devoted to leisure activities
The worker’s consumption of goods and leisure are constrained by what?
Her time and income
What is another name for the absolute value of the slope of the indifference curve is?
Marginal rate of substitution
What happens to hours of work when non labour income changes?
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
The impact of the change in non labour income (holding wages constant) on the number of hours worked is called?
Income effect
