3.5 - Supply of Labour

Question 1

What is the supply of labour?

Answer 1

Number of hours people are willing + able to work at a given wage rate

Question 2

What is the relationship demonstrated by labour supply?

Answer 2

Wage rate rises => Supply rises
Wage incentive

Question 3

What is the reservation wage?

Answer 3

Lowest wage at which people are willing to supply labour

Question 4

What are the 2 types of benefit of supplying labour?

Answer 4

Pecuniary
Non-pecuniary

Question 5

What is a pecuniary benefit?

Answer 5

Wages, salary etc
Financial benefit of supplying labour

Question 6

What is a non-pecuniary benefit?

Answer 6

Non-Wage benefit

Question 7

What do non-pecuniary benefits consist of?

Answer 7

Hours
Opportunities
Location
Job security
Skills, training + qualification
Perks + quality of life

Question 8

What is the substitution effect?

Answer 8

Higher wage
Subs leisure time to supply labour
Opportunity cost of not working rises

Question 9

What is the income effect?

Answer 9

Higher wage
Sustained by supplying less hours
Gains leisure time