Th3.5: Elasticity of Supply

Question 1

What is elasticity of supply?

Answer 1

the responsiveness of supply to a change in wage rates

Question 2

The level of qualifications and training

Answer 2

since if there is a high level of qualifications necessary for the job, people will not easily be able to take up the job so the supply of labour will be inelastic

Question 3

The availability of suitable labour in other industries

Answer 3

depend upon the availability of suitable labour in other industries e.g if a company can ‘poach’ workers from other industries, then it will be more elastic

Question 4

Time

Answer 4

as in the long run supply of labour will be more elastic as people will have time to train. if the job is vocational, it will be inelastic since even if wages fall people won’t leave the job

Question 5

What three things does the elasticity of supply depend on?

Answer 5

the level of qualifications and training
the availability of suitable labour in other industries
time

Question 6

How does government spending and tax affect the supply of labour?

Answer 6

high tax rates and high welfare benefits can reduce incentives and means there is a lower supply - this affects the entire workforce, and so therefore will have an impact on individual occupations

Question 7

How does the level of unemployment affect the elasticity of supply?

Answer 7

high levels of unemployment make supply more elastic as the firm can increase the number of people it employs without having to raise wage rates significantly