Lesson 29-31

Question 1

income effect

Answer 1

the change in demand for a good or service caused by a change in a consumer’s purchasing power

Question 2

Non-pecuniary benefits

Answer 2

benefits offered to workers by firms that are not financial in nature

Question 3

substitution effect

Answer 3

as prices rise — or income decreases — consumers will replace more expensive items with cheaper alternatives

Question 4

transfer earnings

Answer 4

the minimum payment required to keep a factor of production in its present use

Question 5

economic rent

Answer 5

a payment received by a factor of production over and above what would be needed to keep it in its present use

Question 6

wage elasticity of supply of labour

Answer 6

a measure of the sensitivity of quantity of labour supplied to a change in the price of wages.

Question 7

what is the formula for WES?

Answer 7

%change in quantity of labour supplied/%change in wages