Theme 3: Labour Market Elasticities Flashcards
What is elasticity of labour demand?
How responsive demand for labour is to change in wage.
What are the 3 factors that influence the demand for labour?
- Substitutes
- % of total cost
- Time
If a worker is easy to substitute their demand is………
elastic
If a worker is hard to substitute their demand is………
inelastic
If a worker is a large % of their total cost their demand is………
elastic
If a worker is a small % of their total cost their demand is………
inelastic
If the price for a worker changes in the short run demand is…
inelastic
If the price for a worker changes in the long run demand is…
elastic
What are the 3 factors that effect how responsive supply of labour is to a change in price?
- Skills and qualification
- Unemployment
- Time
What effect does very few skills and qualifications have on the supply of labour?
elastic supply
What effect does lots of skills and qualifications have on the supply of labour?
inelastic supply
What effect does high levels of unemployment have on the supply of labour?
Elastic supply- Increase in wage will result in more people entering the working market so the market will react and supply will increase.
What effect does low levels of unemployment have on the elasticity of the supply of labour?
Inelastic- Low unemployment means the market is unresponsive to a change in price so supply will not increase
What effect does the short run have on the PES of supply of labour?
Supply will be inelastic because very little time to train and apply for a job, so wage will be higher.
What effect does the long run have on the PES of supply of labour?
Supply will be elastic because there’s lots of time to apply and train for the job so the wages will be lower.
