LM shifts Flashcards
What are the 7 reasons for labour shifts and demands ?
Derivded demand, productivity, capital cost, migration costs, income tax and benefits, non percuniary benefits, education and training
If the demand for houses increase, how will this affect the demand for builders ?
As elasticity of supply for houses is elastic and the elasticity of demand for builders is elastic. If the demand for houses go up and demand shift to the right, demand for builders go up shifting demand of labour to the right increase wage rates
How can productivy affect the supply and demand of labour ? give example of woodcutters
For example, woodcutters will become more productive if they receive chainsaws instead of woodcutters. They would be able to produce more wood in the same time and create more profit for firms with new chainsaws. This would shift demand to the right.
However, as they can produce more wood in a short amount of time and need less manpower to produce the wood, the demand for labour can also go down.
How can capital costs affect labour of supply and demand ? give example of capital and workers in sainsbury
For instance, if the price of self service checkouts go down in sainsbury, the demand for labour will go down. This would reduce their costs of production and can make more profit.
How can migration affect the demand and supply of labour ?
If workers migrate out of the country, this decreases the labour supply. If workers migrate into a country, this will increase in the labour supply
How can benefits affect the supply and demand of labour ?
If the benefits of unemployed workers go down, they will have less to spend as they relied on benefits and will have no choice but to supply their labour. If the benefits went up, they would have less of a reason to supply their labour and instead stay unemployed and will therefore supply less of their labour shifting supply to the left
How can indirect tax affect the demand and supply of labour ?
If the top band of income tax rose, the supply of labour would reduce. Their house income would go down and reduces the incentives to work.
However, some workers will NEED the money to pay of her mortgage or provide for their family etc. The higher taxes would mean they instead work harder and more houses to earn the same income as before. This would increase supply.
If tax decreased, this may increase supply of labour of skilled workers as it would mean higher incomes for how much they are working. This would increase incentives to work increasing the supply of labour
However, some workers may need just a certain amount of income and so lower tax means they will be able to work less hours for the same income. Labour supply would go down.
Effects of income tax are ambigious
How can non pecuniary benefits effect the supply and demand of labour ?
Non pecuniary benefits are benefits of a job other than the monetary wage received . For example when a firm provdies workers with free holidays. It could also the benefit you have to the rest of society like education
An increase in non pecuniary benefits would increase job satisfaction and make it more appealing and so supply of labour would increase and leading to lower wages. Workers are still incentivised to work even with lower wages
However jobs with low non pecuniary benefits would decrease job satisfaction. For example becoming a bin man is less appealing decreasing the supply of labour. This would increase wages as firms have to make up for the low non pecuniary benefits.r
How can education and training affect labour supply and demand ?
An increase in education and training increase the supply of labour as an increase in the population are more educated.
It can also increase demand as if doing a coding course online can increase the productivity this would increase a firms profit. Firms will demand more coders.
However, like the woodcutting. situation in the long run the more coders there are and the more productive they get this can reduce demand for labour as they will need fewer workers to produce the same output
