Labour market Flashcards
(23 cards)
What is another way to describe the demand for labour
A derivative of demand
How is the labour market guided towards equilibrium
If there is a shortage due to wage then workers will be more ok working for a lower wage
What is marginal physical product
Extra output produced by an extra worker
Describe the marginal physical product curve
A rise initially due to division of labour/specialisation then a fall after a while because of diminishing marginal returns
What is marginal revenue product
The extra revenue generated when an additional worker is hired
How do we calculate MRP
MPP x Price
What are the determinants of DL
Marginal physical product
Availability + cost of capital substitutes
Cost of Labour
Demand for product itself
What is the profit maximising QL for firms
When the marginal revenue product and marginal cost of labour are the same
What is marginal cost of labour
Wage
What is supply of labour
The quantity of labour that are willing and able to work at various wages
When wage increases what happens to quantity of labour
It also increases as there is greater incentive to work
What are the determination factors of supply of labour
- Size of the working population
- Incentive to work
- Migration
- Advantages of work
What are the axis on the labour graph
Wage and Quantity of Labour
What is the elasticity of demand for labour
Responsiveness of demand or supply for labour after a change in wage
What are the determinants of elasticity of demand for labour
Wage as a proportion of total cost
Ease and cost of factor substitution
PED of the product (derived demand)
Time (short run or long run)
What is the elasticity of supply of labour
A measure of the responsiveness of the quantity of labour supplied following a change in the wage rate
What are the determinants for elasticity of supply of labour
Skills/talent required for job
Time needed to learn skills/acquire qualifications
Vocation (other motives about the job like doctors and such)
What are wage differentials?
Differences in wages between different occupations
What are the 2 causes of labour market failure
Geographical immobility of labour (skilled people aren’t where the jobs are)
Occupational immobility of labour (not enough skilled people)
What is a monopsony market?
When there is only one buyer (e.g. NHS with doctors)
What is a trade union
organisation made up of workers in an industry that negotiate better conditions on behalf of the workers
What impact do trade unions have on the market
Higher wage costs and better working conditions but lower employment is needed from firms as technology and automation will become more prevailant
What are the pros and cons of trade unions in labour markets
Pros
- Higher wages
- Better working conditions (more productivity)
Cons
- Real wage unemployment
- Potential for industrial action
