3.5

Question 1

What are the factors that influence the demand for labour?

Answer 1

Price of the product being produced
Demand for the final product
The ability to substitute capital for labour
The productivity of labour

Question 2

What does derived demand mean?

Answer 2

A derived demand means that it depends on the demand for goods/services

Question 3

What are the factors that influence the supply of labour?

Answer 3

Training period
Wages in other occupations
Changes in migration policy
Income tax levels
Working conditions
Trade union power
Level of welfare benefits
Social trends

Question 4

What are the causes of market failure in labour markets?

Answer 4

Geographical immobility of labour - when workers find it difficult to to moves from one area to another

Occupational mobility of labour - ability of a workers to change occupations when they lose a job

Question 5

What are the current labour market issues?

Answer 5

Skills shortages
Youth unemployment
Changes to retirement ages
School leaving age
Zero hour contracts
Temporary/ flexible working

Question 6

What are some forms of government intervention in the labour market?

Answer 6

Max and min wages
Public sector wage setting
Policies to tackle labour market immobility
- Improved education/training
- Targeting skills shortages
- Subsidising employers
- Relocation subsidies
- Reducing information asymmetry
- Reducing discrimiation

Question 7

If demand for labour is elastic and wage rate increases what will happen to the demand for labour?

Answer 7

The demand for labour by firms will decrease

Question 8

If demand for labour is inelastic and wage rates increase what will happen to the labour demanded by firms?

Answer 8

A smaller decrease in quantity demanded of labour by firms

Question 9

What are the factors influencing the supply of labour?

Answer 9

1. Training period - barrier to entry
2. Wages in other occupations - harder to recruit, workers change occupation
3. Changes in migration policy - more migration, less workers
4. Income tax levels - disincentive to work if tax is high
5. Working conditions - disincentive to work if conditions are poor
6. Trade union power - can increase supply, more benefits
   to workers
7. Level of welfare benefits - higher the lower incentive to work
8. Social trends - working from home in Covid

Question 10

What is market failure in a labour market?

Answer 10

Market failure occurs in the labour market when workers are unable to easily move between jobs

Question 11

What causes market failure in a labour market?

Answer 11

1. Geographical immobility of labour
2. Occupational mobility of labour - no transferable skills

Question 12

What are the current Labour market issues in the UK?

Answer 12

• Skills shortages
• Youth unemployment
• Changes to retirement ages
• School leaving age
• Zero hour contracts
• Temporary/ flexible working

Question 13

What are some forms of government intervention in the labour market?

Answer 13

Min and max wages
Public sector wage setting
Policies to tackle labour market immobility
- Improved education/ training
- Targeting skills shortages
- Subsidising employers
- Relocation subsidies
- Reducing information asymmetry
- Reducing discrimination

Question 14

What are the factors that influence the PED of labour?

Answer 14

1. The proportion of labour costs to total cost - the higher the more elastic the demand for labour is
2. Ease & cost of factor substitution - if substituting capital for labour is easy the demand will be more elastic
3. PED of the final product
4. Time period