Microeconomics Flashcards
What are the negatives of a minimum wage?
- unemployment
- discrimination
- tax avoidance
- black labour markets
- shutdown of firms
- lack of flexibility during recession
- development of cheap machinery
- less profit less investment
- higher prices
What are the benefits of a minimum wage?
- increased wages
- reduce labour market issues like discrimination
- counters monopsony power
- efficiency wage theory
- reduced inequality
What are policies to tackle geographical labour immobility?
Geographical labour mobility is the ability to find work in different geographical regions
- infrastructure
- rent control / housing
- relocation subsidies
- immigration policy
- info provision
Policies to target occupational immobility of labour.
The ability of workers to move from one profession to the next.
- training schemes
- info provision
- subsidies for apprenticeships
Factors that influence the supply of labour
- Pecuniary benefits: substitute labour for work as wage rates rise until target income is hit then bends back
- Trade unions / minimum wage
- Govt policies: taxation, lowest working age/retirement age, welfare
- Non pecuniary benefits
- Migration
- Population: demographics, size,
- Value placed on leisure
Factors influencing the wage elasticity of demand for labour
- % of labour costs of total costs
- Ease of sacking
- Time period
- Substitutability for capital
- PED of final product
Factors influencing the wage elasticity of supply for labour
- Vocation
- Time of training period
- No. of qualified people
- Time period
What are current labour market issues?
Discrimination
Monopsonies
Trade unions
Problems with monopsonies?
- Low wages, poor conditions
- Quality suffers
- Shutdown
- Employment for suppliers
- Low revenues for suppliers - less innovation
- Monopoly power of buyer
Benefits of monopsonies?
- Lower prices - progressive and surplus
- Higher profit for the buyer: investment and innovation?
- Impact on employments after a trade union
- Monopsonist likely to be a regular buyer
Benefits of indirect tax
- reduce negative externalities
- tax revenue raised can be ringfenced
Negatives of indirect tax
- black markets
- over/ undersetting tax
- regressive: low consumer surplus due to higher pricing
- inelastic demand?
- how is tax used by govt?
- less revenue for firms taxed: investment, employment, innovation
