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Economics Unit 3 > The labour market: demand and supply > Flashcards

The labour market: demand and supply Flashcards

1
Q

What is derived demand?

A

Occurs when the demand for a factor of production arises from the demand for the output it produces

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2
Q

What does the aggregate demand for labour depend on?

A

The level of economic activity

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3
Q

What does the individual firms demand for labour depend on? (3)

A

The price of labour
Productivity
Price of other factors of production

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4
Q

What is the marginal revenue product? (MRP)

A

The value of the physical addition to output arising from hiring on extra unit of a factor of production

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5
Q

What is the marginal product of labour?

A

The change in total output arising from hiring one more worker

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6
Q

What causes a shift in demand for labour?

A

A change in the MRP

e.g- training, productivity

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7
Q

What is the elasticity of demand for labour?

A

The responsiveness of quantity demanded of labour to a change in the wage rate

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8
Q

What is the equation for the elasticity for demand for labour?

A

% change in quantity of labour demanded/ % change in wage rate

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9
Q

What are the factors that determine the elasticity of demand for labour? (3)

A

Availability of substitutes
Elasticity of demand for the product
The proportion of labour cost to total cost

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10
Q

How does availability of substitutes determine the elasticity of demand for labour?

A

If there are plenty of substitutes, then the elasticity of demand for labour will be high

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11
Q

How does the elasticity of demand for the product determine the elasticity of demand for labour?

A

Derived demand

If the product has high demand, so will labour

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12
Q

How does the proportion of labour cost to total cost determine the elasticity of demand for labour?

A

The larger the proportion of labour cost to total cost, the higher the elasticity of demand for labour

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13
Q

Who are the economically inactive?

A

The % of the population who are either not in work nor seeking it

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14
Q

What are monetary factors?

A

The financial rewards to a particular occupation

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15
Q

What are non monetary factors?

A

The non financial rewards to a particular occupation

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16
Q

What are some examples of non monetary rewards? (3)

A

Status
Job security
Holidays/leisure time

17
Q

What is net advantage?

A

The overall rewards to a particular occupation, taking into account both monetary and non-monetary factors

18
Q

What does the supply of labour to a particular firm depend on? (4)

A

Availability of training
Location
Level of unemployment
Opportunities for overtime work

19
Q

What is unemployment?

A

The number of people of working age who do not currently have a job but are actively seeking work at existing wage rates

20
Q

What causes a movement along the labour supply curve?

A

A change in wage level

21
Q

What is the elasticity of supply of labour?

A

The responsiveness of quantity of labour supplied to a change in wage rate

22
Q

What is the equation of the elasticity of supply of labour?

A

% change in quantity of labour supplied/ % change in wage rate

23
Q

What does the elasticity of labour supply depend on? (3)

A

The skills and qualifications required
The length of training period
Sense of vocation

24
Q

How does the skills and qualifications required determine the elasticity of labour supply?

A

Jobs that require high skills will find it more difficult to attract workers when the wage rate rises
Elasticity will be lower for low skilled jobs

25
Q

How does the length training period determine the elasticity of labour supply?

A

Jobs with longer training periods will have lower elasticities because workers may be put off

26
Q

How does sense of vocation determine the elasticity of labour supply?

A

Jobs which have a vocational element will tend to be inelastic

27
Q

What is the backward bending supply curve?

A

The individual labour supply curve is thought to be this shape because it is assumed workers will prefer to work fewer hours as their income increases above a certain level

28
Q

What is the income effect?

A

Depending upon an individuals target level of income, they can work fewer hours for the same overall pay

29
Q

What is the substitution effect?

A

Individuals will tend to choose to work more hours, as the opportunity cost of leisure increases

Economics Unit 3 (15 decks)

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