The Labour Market

Question 1

what is the labour market composed of ?

Answer 1

sellers of labour (Households)

buyers of labour (firms)

Question 2

who supplys the labour ?

Answer 2

workers

Question 3

who demands the labour ?

Answer 3

firms

Question 4

what type of demand is the demand for labour ?

Answer 4

derived demand

Question 5

what is derived demand ?

Answer 5

demand that is dependent on the demand for goods and services

Question 6

what does demand for labour depend upon ?

Answer 6

The Marginal Physical Product of Labour (MPPL)
The Marginal Revenue Product of Labour (MRPL)

Question 7

what is marginal physical product of labour (MPPL) ?

Answer 7

is the extra output produced when an additional unit of labour is employed

Question 8

what is marginal revenue product of labour (MRPL) ?

Answer 8

is the extra revenue earned when an additional unit of labour is employed

Question 10

what are the factors that shift the demand for labour curve ?

Answer 10

price

substatuitablity of labour for capital

productivity of labour

Question 11

what is the elasticity of demand or labour ?

Answer 11

how responsive a firms demand for labour is to a change in price of labour

Question 12

what are the factors that influence that PED of labour ?

Answer 12

proportion of labour costs to total costs

ease and cost of factor substitution

PED for final product

time period

Question 13

monetary factors that influence the supply of labour ?

Answer 13

wages
salary
commission
bonus
piece rate pay
performance related pay
share options
fringe benefits

Question 14

non-monetary factors that influence the supply of labour ?

Answer 14

length of training
job security
job satisfaction
level of challenge

Question 15

what factors shift the supply curve for labour ?

Answer 15

training period
wages in other occupations
income tax levels
working conditions

Question 16

in a perfectly competitive labour market, how are wage rates determined ?

Answer 16

DL = SL

Question 17

what is the assumption of workers in perfect competition ?

Answer 17

workers possess identical skills
receive same wage rate

Question 18

if there is excess demand of labour, what does that mean for labour rates ?

Answer 18

shortage of workers, causing wages to increase

Question 19

of there is an excess supply of labour ?

Answer 19

causes wages to decrease

Question 20

are perfectly competitive firms price takers of makers ?

Answer 20

price takers

Question 21

if a perfectly competitive firm is a price taker, what does this mean in terms of labour ?

Answer 21

they have to accept the wage rate that workers are being paid in the industry

Question 22

what are the 3 main causes of imperfections in the labour market ?

Answer 22

monopsony power

trade unions

imperfect information

Question 23

what is a monopsony ?

Answer 23

a single employer of labour in a market, giving the employer considerable labour market power to set wages and employment

Question 24

the higher the percentage of workers from a firm that belong to a trade union, the greater the … ?

Answer 24

collective bargaining power

Question 25

what are the other factors that influence trade union power ?

Answer 25

employee participation

state of the economy

unemployment level

productivity of labour

wage levels as a proportion of total costs

ability to swap labour for capital

size of trade union

firms profits

Question 26

why do governments intervene in the labour market by setting a minimum wage ?

Answer 26

to improve equity

avoid exploitation of workers

Question 27

what are the advantages of minimum wages ?

Answer 27

guarantees a minimum wage for the lowest paid workers

higher income levels help to increase consumption in the economy

may incentivise workers to be more efficient

Question 28

what are the disadvantages of a national minimum wage ?

Answer 28

raises costs of production for firms which may result in firms raising the price of their goods/services

increase unemployment potentially, as they may lay off workers to lower production costs

Question 29

where doe wage discrimination occur ?

Answer 29

when there is a difference in wages between workers with comparable skills in the same job

Question 30

what are the 2 most common wage discrimination scenarios ?

Answer 30

gender pay gap discrimination

ethnicity discrimination