monopsony Flashcards
what is a monopsony
A monopsony occurs when a firm has market power in employing factors of production (e.g. labor).
A monopsony means there is one buyer and many sellers.
characteristics of an imperfect monopsony
One firm hiring workers- firm is large enough
Workers are relatively immobile
Firm is wage maker- to hire additional workers the firm must increase the wage
who are the wage makers
either main or only firm in the industry
wage maker
what an example of a monopsony
government- employs nurses, police etc
what is labor market flexibility (3)
Means that it’s easier for firms to hire and fire workers so that they only employ the labor they need so there are no labor (skills) shortages or surpluses.
Workers can more freely move between one sector of the labour market to another e.g occupation/geographical location in response to price (wage signals)
Also, wages will react rapidly to changes in market forces (demand for and supply of labor in the market). As a result wage rates and the number of workers employed are flexible.
what are the 5 types of labor market flexibility
numerical
temporal
locational
functional
wage
numerical meaning
how easy is it to change the number of workers – hiring and firing
temporal meaning
how easy it is to change the hours people work
locational
how easy it is to change where employees work e.g at home/office
functional meaning
how easy it is to change the tasks workers perform
wage meaning
how easy it is to alter the wage rate paid to workers
what causes a lack of labour flexibility (supply side problems) (7)
Occupational immobility (Structural unemployment)
Geographical immobility (Regional unemployment)
Trade Unions (classical unemployment/sticky wages)
Imperfect information (Frictional unemployment)
Lack of training (Merit Good!)
Employment Rights – legislation
Min/Living Wage and Max Wages (Price Floor/Ceilings)
why imperfect info
If labor is better informed about job vacancies, or about opportunities for promotion, workers can respond more effectively to changes in the requirements of firms. Workers may not be aware of job opportunities that match their skills, while employers might struggle to find suitable candidates, leading to unemployment or underemployment.
