The Labour Market Flashcards
What type of demand is labour?
Derived demand
What does the marginal productivity theory say?
The demand for any factor of production depends on its marginal revenue product (MRP)
What is marginal revenue product?
The extra revenue gained by the firm from employing one more worker
What is the formula for marginal revenue product?
MRP = MPP X MR
What is the marginal physical product of labour(MPP)?
The output produced by each additional worker
What is the marginal cost of labour?
The cost of hiring one additional worker
When does a firm have an optimal number of workers?
When MRP of labour is equal to MC of labour
When is a firm employing too few workers?
When MRP of labour is greater than MC of labour
When is a firm employing too many workers?
When MRP of labour is less than MC of labour
What is a firm’s demand for labour generally affected by?
Productivity
What do high unit costs suggest?
There is low productivity
What is an individual’s labour supply?
The total number of hours which that person is willing to work at a given wage rate
What is the labour supply for an occupation?
The number of workers willing to work in that occupation at a given wage rate
What is supply of labour in the long run determined by?
Monetary and non-monetary factors
What is a monetary benefit?
The welfare a worker gains from the wage they receive
What is a non-monetary benefit?
Welfare a worker can gain from non wage benefits of the jobs. For example, employee discount, flexible working hours
What factors can affect supply of labour?
-Working population
-Competitiveness of wages
-Publicising of jobs opportunities
What type of job is supply of labour elastic for?
Low skilled jobs
What type of job is supply of labour inelastic for?
Skilled jobs
What are wage differentials?
The differences in wages between different groups of workers, or between workers in the same occupation
What are the the reasons for wage differentials?
- Amount skill required
- Region
- Trade Unions
What is a trade union?
An organisation formed to represent the interests of a group of workers
What are the aims of a trade unions?
Bargain with employers for:
- Better pay
- Better working conditions
- Job security
What are productivity bargains?
When unions agree to specific changes that will increase productivity in return for higher wages or other benefits
What is a downside of trade unions?
The negotiations for better wages may lead to increase unemployment, as firms cannot afford to keep all the workers at the increased wage
What is wage discrimination?
When employers with monopsony power pay different wage rates based on different workers willingness to supply labour
What is labour market discrimination?
When workers are being discriminated against for differences in things like gender or race
What are the advantages of wage discrimination?
- Costs get lower, meaning increased demand for labour, providing more jobs
- Reduces the cost of wages, which can lead to higher profits
What are the disadvantages of wage discrimination?
- Can lead to exploitation of vulnerable workers
- Additional administration for employers
- Inequality
What happen to employers as a result of discrimination?
They incur increased costs
What happen to the government as a result of discrimination?
Worker have lower wages so they can pay less tax, which decrease tax revenue for the government
What is the national minimum wage?
A legal minimum hourly rate of pay for different age groups
What are the advantages of a national minimum wage?
- Help those on low incomes, reduce poverty
- Boost morale of workers as they are getting better wages
- Greater incentive to become employed
- Government tax revenue is greater
What are the disadvantages of a national minimum wage?
- Increase wage costs, increased unemployment
- Decrease competitiveness of UK firms that have higher wages compared to firms in other countries with lower wages
- Increased wage costs may be passed on to price, inflation increase
What are the two types of labour market?
Perfectly competitive & Monopsony
