Lesson 11 - The Labour Market Flashcards
1
Q
What type of market is the labour market?
A
Factor market
2
Q
Demand for labour is:
A
- derived demand from demand for the good/service being produced
3
Q
What is marginal physical product (MPP)?
A
- the marginal return of labour as output increases
- short run fixed capacity, so the law of diminishing marginal returns kicks in
- diminishing marginal productivity
4
Q
What does the MPP curve show?
A
- physical output produced by the extra worker
5
Q
How do you calculate MRP?
A
MPP x P(price)
6
Q
The elasticity of demand for labour when wages change?
A
Inelastic demand - wages are a small part of costs, and it is difficult to replace with labour
Elastic demand - wages are a large part of costs, and it is easy to replace with labour
7
Q
What factors affect the elasticity of supply of labour?
A
- occupational mobility
- geographical mobility
- skill level required
8
Q
How is excess demand eliminated in the labour market?
A
Firms bid up wages, supply extends and demand contract
9
Q
How is excess supply eliminated in the labour market?
A
Workers accept lower wages, demand extends, supply contracts
