Theme 3 - Labour market

Question 1

What are the 6 factors affecting demand for labour?

Answer 1

Wages
Demand for product
Price of factors of production
Wage in another country
Technology
Regulation

Question 2

How do wage rates impact demand for labour?

Answer 2

Higher wages, less demand.
Lower wages, more demand.

Question 3

How does the demand for a product impact the demand for labour?

Answer 3

When demand for a product increase, firms want to employ more staff and so demand for labour rises

Question 4

How does prices of other factors of production impact demand for labour?

Answer 4

If machinery and equipment become cheap, firms will switch to machinery.

Question 5

How does wages in other countries impact demand for labour?

Answer 5

If wages in other countries are lower, demand for labour in the host country will fall.

Question 6

How does technology impact demand for labour?

Answer 6

A rise in technological advancements means that demand for labour may decrease

Question 7

How does regulation impact demand for labour?

Answer 7

High laws and regulations around labour markets may cause less demand for labour

Question 8

What are the 4 factors affecting the PED of labour?

Answer 8

• Elasticity of demand of goods
• Wages as a % of total costs
• Substitutes for labour
• Inelastic labour in the SR

Question 9

Explain how labour is inelastic in the short run

Answer 9

In the short run if a firm wants to increase output they have no choice but to employ new staff however, in the long run, machinery and jobs are more elastic

Question 10

What is marginal revenue product?

Answer 10

Extra revenue from hiring a new worker

Question 11

What is marginal physical product

Answer 11

Extra output of hiring a new worker

Question 12

What are the 7 factors that affect the supply of labour?

Answer 12

Wages
population and age
non-monetary benefits
qualifications
trade unions
conditions of other jobs
legislation

Question 13

How does population and age impact the supply of labour?

Answer 13

When a population has majority of people at working age, this means that there is more supply of labour.

Question 14

What are non-monetary benefits and how do they increase the supply of labour?

Answer 14

Non-financial incentives such as a good social life etc may increase the supply of labour

Question 15

How do trade unions impact the supply of labour?

Answer 15

Trade unions can increase the supply of labour by encouraging firms to employ them etc

Question 16

How do conditions of other jobs impact the supply of labour?

Answer 16

Supply for labour will be lower in an area that offer higher wages than another occupation

Question 17

What are the two types of market failure in labour markets?

Answer 17

Occupational immobility and geographical immobility

Question 18

What are the 2 factors that affect the elasticity of supply of labour?

Answer 18

• Level of training and qualifications
• Time

Question 19

How does the level of training impact the elasticity of supply?

Answer 19

Highly skilled jobs means that only people with certain qualifications can gain that job making it inelastic

Question 20

How does time impact elasticity of supply?

Answer 20

In the long run, more people can train and gain skills making supply of labour more elastic

Question 21

3 Ways in which a minimum wage can be beneficial to the economy

Answer 21

• Can help to reduce poverty
• Employees may feel more loyal to the business
• Reduced labour turnover may mean workers are more productive.

Question 22

What are 3 negatives of a minimum wage?

Answer 22

• Increase costs for companies leading to inefficiencies
• Regional imbalances
• Higher unemployment if people earning more now earn less

Question 23

What is a maximum wage?

Answer 23

A maximum wage is when the government intervenes to cap how much earners can earn in specific sectors

Question 24

The main benefit of a maximum wage

Answer 24

A reduction in inequality and poverty because higher income earners can no longer earn substantial amounts

Question 25

What are the 3 factors that affect elasticity of demand?

Answer 25

Substitutes, percent of total cost and time (LED)

Question 26

What are the 3 factors affecting elasticity of demand?

Answer 26

Qualifications and skills, unemployment and time (LES).

Question 27

What is marginal revenue product?

Answer 27

This states that for an additional worker, how much extra revenue that extra worker brings into the business

Question 28

How does marginal revenue product depend on the elasticity of labour?

Answer 28

For an inelastic labour supply, the business will see a greater increase in marginal revenue product than for elastic labour supply

Question 29

What are some reasons for wage differentials in a competitive market?

Answer 29

• Differences in skills and qualifications
• Public vs private sector workers
• Discrimination: race and gender
• Elasticity of supply and/or demand
• Immobility of labour

Question 30

What are some evaluations of reducing wage differentials in a competitive market?

Answer 30

• Trade union power
• National minimum wage
• Investments in training and skills
• HS2 spending