Supply of Labour

Question 1

What is the supply of labour?

Answer 1

The number of workers willing to work in an occupation at a given wage rate. Potentially referring to an individual, industry, or an economy.

Question 2

What are the 7 factors influencing labour supply?

Answer 2

1) Pecuniary factors.
2) Size of the working population.
3) Information.
4) Changes in migration.
5) Trade unions.
6) Income tax.
7) Welfare payments.

Question 3

How can pecuniary factors influence the supply of labour?

Answer 3

If wage rates in one industry are higher than in another, workers from other industries will be attracted to working in the given industry with higher wage rates.

Question 4

How can the size of the working population influence the supply of labour?

Answer 4

If the population of the working age is falling, so is the supply of labour. Vice-versa.

Question 5

How can information influence the supply of labour?

Answer 5

How effectively job vacancies and opportunities are promoted/publicised will influence how quickly posts are filled.

Question 6

How can changes in migration influence the supply of labour?

Answer 6

When there are few limits on migration, the supply of labour can increase. Vice-versa.

Question 7

How can trade unions influence the supply of labour?

Answer 7

Trade unions can influence the wage rates in some industries, resulting in higher supply of labour in unionised industries.

Question 8

How can income tax influence the supply of labour?

Answer 8

Marginal tax rates will influence how willing individuals are to supply their labour. If marginal tax rates are high, supply of labour will be reduced. Vice-versa.

Question 9

How can welfare payments influence the supply of labour?

Answer 9

When benefits are high, there is a disincentive to enter the labour market, reducing the supply of labour.

Question 10

What is the elasticity of labour supply?

Answer 10

The responsiveness of the supply of labour to changes in the wage rate.

Question 11

What are 3 influences on elasticity of labour supply to an industry?

Answer 11

1) Time: Elasticity of supply is lower in the short-run.
2) Levels of unemployment: If there is high unemployment, the elasticity of labour supply will be high, as many will respond to changes in the wage rate.
3) Level of skills/qualifications: When many workers are skilled or have the necessary qualifications, supply of labour will be more elastic.

Question 12

What is geographical mobility?

Answer 12

How easily workers can move from one area to another to find work.

Question 13

What is occupational mobility?

Answer 13

The ability of workers to move from one job to another.

Question 14

What are two examples of market failure in labour markets?

Answer 14

1) Geographical immobility.
2) Occupational immobility.

Question 15

What are 2 potential reasons for geographical immobility?

Answer 15

1) High cost of moving. E.g. moving to London is very expensive.
2) The reluctance to leave behind family and friends.

Question 16

How can geographical immobility lead to market failure in labour markets?

Answer 16

It means that resources (labour) is not efficiently allocated, due to geographical immobility.

Question 17

What is the labour market?

Answer 17

The supply of and demand for labour, with employees providing the supply, and employers providing the demand.

Question 18

What is a potential reason for occupational immobility?

Answer 18

The lack of potential skills or qualifications necessary to take up another job.

Question 19

How can occupational immobility lead to market failure in labour markets?

Answer 19

It means that demand for labour will not equal supply for labour, as resources are inefficiently allocated due to occupational immobility.

Question 20

What is occupational immobility?

Answer 20

When a worker cannot easily change occupation.

Question 21

What is geographical immobility?

Answer 21

When workers cannot easily move from one area to another.

Question 22

Explain the supply for labour curve.

Answer 22

Upward sloping.

Question 23

Explain the supply for labour curve in a monopsony (2).

Answer 23

The supply for labour curve is upward sloping, but below the marginal cost curve. This is because the higher wage rate paid to the marginal worker needs to be paid to all workers.

Question 24

How has Brexit limited the UK’s access to and supply of labour?

Answer 24

It has limited the UK’s access to workers from European countries, by making it more for European migrants to move to the UK, increasing geographical immobility.