3.5

Question 1

What is derived demand for labour

Answer 1

Demand for labour caused by demand for the goods provided

E.g demand for labour caused by the demand for housing

Question 2

What is the demand for labour definition

Answer 2

The amount firms are willing to pay for a certain amount of workers

Question 3

Definition of unemployment

Answer 3

no of people willing and able to work, but have no job

Question 4

Definition of underemployed

Answer 4

When a worker is either to skilled for their current job or is working less than they’d like( e.g part time instead of full time)

Question 5

What are the factors that determine demand for labour

Answer 5

1. Demand for the final product
2. Wage of the workforce
3. Productivity of the workforce
4. Selling price of the final good
5. Cost of capital substitution

Question 6

Why is it acceptable to have an expensive workforce

Answer 6

If your workforce is highly productive then there high wage cost is spread over a larger output
Also they’re likely to be higher skilled, thus the quality of the products will be better

Question 7

Define the supply of labour

Answer 7

The number of workers willing and able to work at any given time

Question 8

What are the factors affecting the supply of labour

Answer 8

1. Wage rate
2. Level of skill
3. Working conditions / benefits
4. Level of taxation
5. Entry barriers to the profession

Question 9

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Answer 9

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Question 10

Why does the market mechanism lead to market failure in the labour market

Answer 10

If wages are to high, there will excess supply but a shortage of demand.
In response the market mechanism, to clear the market, would decrease wages or lose jobs.
Which decreases workers standard of living

Question 11

Why has the gov invested heavily into reducing youth unemployment

Answer 11

The attempt to reduce the amount of occupation immobility, e.g school leavers are coming out of school without the necessary skills to get a job.
Which is increasing unemployment in the economy, bad for gov ( opportunity cost with welfare payments etc)
Investing in apprenticeships etc will improve mobility and ill reduce unemployment

Question 12

Define labour market flexibility

Answer 12

The speed and ability of a labour market to adapt to a change in the economy

Question 13

What are the measures of a flexible labour market

Answer 13

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