Section 7 - The Labour Market

Question 1

Economically active population

Answer 1

The people in an economy who are capable of, and old enough to, work (regardless of whether they’re employed or unemployed)

Question 2

Derived demand for labour

Answer 2

Demand for goods increases, so does the demand for labour

Question 3

Marginal productivity theory

Answer 3

The demand for any factor of production depends on it’s marginal revenue product (MRP)

Question 4

Marginal revenue product of labour

Answer 4

The extra revenue gained by the firm from employing one more worker

Question 5

Marginal Physical Product of labour

Answer 5

The output produced by the additional worker

Question 6

MRPL equation

Answer 6

MPPL x MR

Question 7

Marginal Cost of Labour

Answer 7

The cost of hiring one additional worker

Question 8

(wage) Elasticity of demand for labour

Answer 8

The change in demand for labour when the wage level changes

Question 9

Demand for labour

Answer 9

Comes from firms

Question 10

Supply for labour

Answer 10

Comes from the economically active population

Question 11

Individual’s labour supply

Answer 11

The total number of hours that a person is willing to work at a given wage rate

Question 12

Pecuniary benefits

Answer 12

This is the welfare a worker gains from the wage they receive (or more specifically, what’s bought with it)

Question 13

Non-pecuniary benefits

Answer 13

This is the welfare a worker can gain from non-wage benefits of their job

Question 14

Wage differentials

Answer 14

The differences in wages between different groups of workers, or between workers in the same occupation.

Question 15

Nominal wages

Answer 15

The amount of money that people are paid

Question 16

Real wages

Answer 16

Take inflation into account and represent the actual purchasing power of people’s wages

Question 17

Monopsony labour market

Answer 17

There’s a single employer, so workers have only one choice of employer to work for.

Question 18

Trade Union

Answer 18

An organisation formed to represent the interests of a group of workers.

Question 19

Collective bargaining

Answer 19

When a trade union negotiates with an employer

Question 20

Productivity bargaining

Answer 20

Where unions agree to specific changes that’ll increase productivity in return for higher wages or other benefits for its members

Question 21

Performance-related pay agreements

Answer 21

When workers get pay increases that are linked to the quality of their work and their productivity

Question 22

Wage discrimination

Answer 22

When employers with monopsony power pay different wage rates based on different workers’ willingness to supply labour

Question 23

Labour market discrimination

Answer 23

When a specific group of workers is treated differently to other workers in the same job

Question 24

Racial Discrimination

Answer 24

When employers only want to work with and employ people from a particular ethnic background

Question 25

Gender pay gap

Answer 25

Where average pay rates are lower for women than for men

Question 26

Economically inactive

Answer 26

If people are not working and not looking for work

Question 27

Replacement ratio

Answer 27

The ratio of how much a person would earn if they were unemployed to how much they would earn if they were employed

Question 28

Unemployment trap

Answer 28

People can be better off by voluntary unemployment and claiming unemployment benefit rather than working for a low wage

Question 29

Geographical immobility

Answer 29

When workers aren’t able to move to different locations to find the best job for themselves

Question 30

Occupational immobility

Answer 30

When workers aren’t able to move from one occupation to another with ease

Question 31

Segmented labour markets

Answer 31

There are many distinct labour markets, which are sub-markets of the labour market

Question 32

Demographic changes

Answer 32

Changes in the composition of a population

Question 33

Ageing population

Answer 33

A large proportion of the population is over 60

Question 34

Incentives

Answer 34

Given to people to encourage them to work, which will increase the the participation rate and labour supply.

Question 35

The informal market (black market)

Answer 35

Economic activity that occurs without taxation and government regulation, and firms won’t pay corporation tax

Question 36

National minimum wage

Answer 36

Sets a legal minimum hourly rate of pay for different age groups