Micro Six Flashcards
Labour Markets, Price Discrimination, Minimum Wages, Trade Unions, Monopsony, Discrimination, Distribution of Income and Wealth, Poverty
What is the demand for labour derived from
Derived from the buyer’s desire to obtain what the labour can produce
How can a firm decide whether hiring a worker is profitable
If their MRP (marginal revenue product) is greater than or equal to the cost of employing them (most likely set by the wage rate)
What is a workers MRP
The increase of revenue for a firm from employing that worker
marginal physical product * marginal revenue
Why is the MRP/Demand curve sloped downwards
Due to diminishing marginal returns, each subsequent worker adds less to the total
Why might the elasticity of demand for labour vary
The availibility of substitutes where labour can be replaced with capital
The expected duration of the change, wage rates rising for a short time might make firms less likely to invest in machinery
What could cause a shift in the supply for labour
Expectations of the future
Working conditions
Trends
Immigration/Emmigration
Education and Training
Changes in other (related) labour market
What makes up the net advantages of a job
Net Advantages = Pecuniary benefits + Non-pecuniary benefits - Disutility
What are the pecuniary benefits of labour
Financial/monetary benefits
What are the non-pecuniary benefits of labour
Non-financial benefits
What are disutilities of work
Factors that reduce a worker’s utility
What is a payment to a worker to compensate for the factors that might cause disutility
Compensating wage differentials
What are factors that may affect price elasticity of the supply of labour
Occupational immobility of labour
Geographical immobility of labour
Short run wage changes
Strong role for non-wage incentive
What is the national minimum wage
A legally-binding minimum price for labour (in force since 1999)
What are the possible results from changing the national minimum wage
Employers may remove non-pecuniary benefits to keep profit margins
