The Labour Market

Question 1

Define derived demand

Answer 1

Derived demand is when demand for a good or service is derived from the demand of a commodity by Households

Question 2

Show how demand for labour is derived demand

Answer 2

Demand for labour is derived demand, because if consumers want more of a particular good or service, more firms want workers that make the product

Question 3

State the factors that affect the demand for labour

Answer 3

1. The wage factor (the higher the wage rate, the lower the demand for labour)
2. Non wage factors:
   -consumer demand for goods and services
   -increasing productivity
   -changes in price and productivity of capital like job replacing technology

Question 4

State are the factors that affect the supply of labour

Answer 4

1. The wage rate (higher pay is more encouraging for workers)
2. Non wage rates;
   -total supply of labour (larger the population, greater the supply)
   - general level of education
   - age and demographic distribution in population

Question 5

Define wage differentials

Answer 5

These Are the differences in wages between different occupations and employees within the same occupation.

Question 6

What happens when the wage is below the equilibrium in the labour market?

Answer 6

VACANCIES. Demand for labour will be greater than supply of labour is causing excess demand.

Question 7

What happens when the wage is above equilibrium in the labour market?

Answer 7

UNEMPLOYMENT. There will be excess supply and unemployment.

Question 8

Give reasons for wage differentials between occupations

Answer 8

1. Different abilities and qualifications.
2. Dirty jobs and unsociable hours.
3. Lack of information about jobs and wages

Question 9

Give reasons for wage differences within the same occupation

Answer 9

1. Length of service.
2. Discrimination
3. Public and private sector pay gap.