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(Micro) Economics / Paper 1 > The labour market > Flashcards

The labour market Flashcards

1
Q

Define a labour market

A

Where workers sell their labour and employers buy the labour

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2
Q

Define supply of labour

A

Those who are willing and able to work

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3
Q

Define demand of labour

A

The amount of labour that employers seek to higher during a given time period at a particular wage rate

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4
Q

Define gross pay

A

The amount of money that an employee earns before any deductions are made

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5
Q

Define net pay

A

The amount of money that an employee is left with after deductions are made from gross pay

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6
Q

Define income tax

A

A tax demanded on personal income (e.g. a tax on a person’s wages)

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7
Q

Define national insurance

A

A contribution payed by workers and their employers towards the cost of state benefits.

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8
Q

Define pension

A

A fixed amount paid at regular intervals to a person (usually retired) or their surviving dependants.

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9
Q

Define collective bargaining

A

The process in which working people, through their unions, negotiate contracts with their employers to determine their terms of employment

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10
Q

What payments are deductions from gross pay (making net pay)?

A
  • Income tax
  • National insurance
  • Pension
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11
Q

What payments require both the worker and employer to pay?

A
  • National insurance
  • Pension
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12
Q

How do you calculate gross pay?

A

Base pay (amount contract states you are paid) + Extra payments (bonuses, overtime etc)

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13
Q

How do you calculate net pay?

A

Gross pay - deductions (income tax, national insurance, pension)

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14
Q

What does the labour market consist of?

A

Supply of labour by households and demand for labour by firms

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15
Q

What is the role of the labour market?

A
  • Enable workers who are willing and able to sell their labour to meet employers who are willing and able to offer them a job
  • Determine the wage rate/salary for this work
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16
Q

What basis does the labour market operate on?

A

Local, national and international

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17
Q

What does the labour market depend on?

A

The exchange of information between employers and employees on wage rates, employment conditions, level of competition, location etc

18
Q

What are reasons for lack of labour mobility?

A
  • Lack on necessary skills
  • Unable/unwilling to relocate
  • Personal factors
  • Information failure
19
Q

Explain how lack of necessary skills leads to lack of labour mobility?

A

Skills needed in different jobs are not interchangeable

20
Q

Explain how being unable/ unwilling to relocate leads to lack of labour mobility?

A

Speaking only English leads to restriction to jobs only in English speaking countries

21
Q

Explain how personal factors leads to lack of labour mobility?

A

Family ties to an area or would prefer to live in certain areas.

22
Q

Explain how information failure leads to lack of labour mobility?

A

Not aware of what jobs are available

23
Q

Interaction between workers and employers: How is the contract determined with an individual worker and employer?

A

The work deals directly with the employer about pay etc

24
Q

Interaction between workers and employers: How is the contract determined with collective bargaining

A

Trade unions bargain for all their members with employer

25
Q

How does price elasticity affect the determination of wages?

A
  • If PED and PES are both inelastic, the wage may be high as employers are willing to pay a high price to get the right person/ people and the supply is limited
  • If PED and PES are both elastic, the wage may be low as employers do not want as many people if wage rise and the supply is plentiful
  • If PES is totally inelastic (unique talent) then the wage is fully dependant on how many people want to employ this person.
26
Q

What does demand of labour depend on?

A

Demand of labour depends on the demand for the product that labour helps to produce/ sell.

27
Q

What does the supply of labour depend on?

A

The amount of those in work and those who are seeking for working (including the unemployed)

28
Q

How may a change in wages affect supply of labour?

A

A rise in wages may result in more people who are currently inactive (ill, looking after family, discouraged, retired) being willing to work

29
Q

Examples of factors that affect demand of labour:

A
  • Demand for products
  • Wage rates
  • Real wages
  • Productivity of labour
  • Profit of firms
  • State of the economy
30
Q

Explain how demand for products affects demand of labour

A

If demand for a product increases then more labour is demanded

31
Q

Explain how wage rates affect demand of labour

A

The demand for labour has an inverse relationship with wages

32
Q

Explain how real rates affects demand of labour

A

If real wages fall then labour may replace capital

33
Q

Explain how productivity of labour affects demand of labour

A

If labour productivity rises then higher wages can be paid

34
Q

Explain how profit of firms affects demand of labour

A

If profits increase then firms expand and take on more labour

35
Q

Explain how the state of the economy affects demand of labour

A

A growing economy is likely to require more labour

36
Q

Examples of factors that affect supply of labour:

A
  • Wage rate
  • Monetary payments
  • Non-monetary factors
  • Education/ training
  • Barriers to entry
  • Size of working population
37
Q

Explain how wage rates can affect supply of labour

A

The higher the wage, the more people are willing to work

38
Q

Explain how monetary payments can affect supply of labour

A

Higher pay through overtime/ productivity pay will increase supply of labour

39
Q

Explain how non-monetary factors can affect supply of labour

A

Better working conditions/ promotion chances will increase supply of labour

40
Q

Explain how education/ training can affect supply of labour

A

Will increase the supply of skilled labour

41
Q

Explain how barriers to entry can affect supply of labour

A

Qualifications/ trade unions/ discrimination may reduce supply of labour

42
Q

Explain how the size of working population can affect supply of labour

A

More migrants/ a higher retirement age etc will increase supply labour

(Micro) Economics / Paper 1 (13 decks)

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