Unit 3

Question 1

How is wage determined

Answer 1

By supply and demand the equilibrium is the wage determined

Question 2

What are the factor affecting demand?

Answer 2

Derived demand
Price of complements of labour
Price and availability of substitute
Wage itself

Question 3

Factor affecting supply

Answer 3

Wage itself

Non pecuniary benefits

Question 4

Elasticity of demand

Answer 4

Proportion of wage to total cost
Ease of capital substitution
Time taken to find substitute
Elasticity for product

Question 5

Elasticity of supply

Answer 5

Immobility of labour
Lack of skills or qualifications
Length of time to train

Question 6

What is mrp

Answer 6

Marginal product of labour

Change in a firms revenue resulting in employing one more worker

Question 7

What is an monopsony/oligopsony

Answer 7

One or fee dominant buyers

Question 8

how does minimum wage cause market failure?

Answer 8

market wage is at w* 
government raise wage above this
q1 demanded q2 willing to work
therefore unemployment
misallocation of resources 
so market failure

Question 9

what is a trade union?

Answer 9

organisations that represent a worker to bargain for rights or wages.

Question 10

what actions can trade unions make?

Answer 10

meetings with managers
strikes
sit ins
work to rule
public backings

Question 11

how to trade unions cause market failure?

Answer 11

artifically restricts the labour supply due to fees and restricting qualifications 
increase wages 
decreases q
misallocated resources
unemployment 
market failure

Question 12

how does skill shortages cause market failure?

Answer 12

training is a merit (socirty benefits more than firm, training is underconsumed
less training= less productivity
at given wage if trained would be at q2 but at q1
misallocation of resources
therefore market failure

Question 13

what are the 2 theories of discrimination/

Answer 13

becker’s theory

statistical theory

Question 14

what is becker’s theory?

Answer 14

firms prepared to pay higher costs so they dont employ certain groups

Question 15

what is the statistical theory?

Answer 15

firms lower wages due to generalisation

eg. young workers are more productive or older workers are less productive

Question 16

how does discrimination cause market failure? beckers

Answer 16

q1 to q2 unemployed
misallocation of resources
q1 t q* jobs taken by group x instead of y
q* to q2 group x attracted into market
group x is misallocation

Question 17

how does discrimination cause market failure? statistical

Answer 17

q1 to q2 shouldnt be working
misallocated
market wage is high w1 to w2
less productive than thought

Question 18

what are the 2 types of immobility of labour?

Answer 18

geographical and occupational

Question 19

what is geographical immobility of labour?

Answer 19

people cant move job because of house prices or transport

Question 20

what is occupational immobility of labour?

Answer 20

can move to a job because of qualifications aren’t recognised
or they do not have the skills for the job

Question 21

what is imperfect information?

Answer 21

people do not take jobs as they are unaware of a vacanies, all job adverts dont reach all potential candidates
people then are misallocated

Question 22

what is economic inactivity?

Answer 22

chose to be economically inactive

discourages workers represented as a waste of resource this could be a burden a tax payers