LABOUR MARKET Flashcards
(21 cards)
What is the labour market also known as?
Factor market
What determines the supply of labour?
Who wants to be employed (employees)
What is meant by derived demand in the context of labour?
Demand for labour comes from the demand for what it produces
What factors affect the demand for labour?
- Wage rate
- Demand for products
- Productivity of labour
- Substitutes for labour
- Profitability of the firm
- Number of firms in the market
How is the marginal revenue product (MRP) calculated?
Marginal product multiplied by the marginal revenue
What does the elasticity of demand for labour measure?
How responsive the demand for labour is to changes in the market wage rate
List the determinants of the elasticity of demand for labour.
- Cost of labour as a proportion of total costs
- Ease of substituting factors
- Price elasticity of demand (PED) for the product
What influences the supply of labour to a particular occupation?
- Wage rate
- Demographics
- Migration
- Advantages of work
- Leisure
- Trade unions
- Taxes and benefits
- Training
What is the relationship between wage rate and supply of labour?
Upward sloping supply curve
What does the term ‘sticky wages’ refer to?
Wages in an economy don’t adjust to changes in demand
What is monopsony power?
When there is only one buyer of labour in the market
What happens to the wage rate in a monopsony market?
Wage W2 is lower than the market equilibrium competitive wage
How do trade unions influence wages?
By pushing for higher wages and increasing job security
What is one potential negative effect of trade unions on employment?
Higher wages could cause unemployment
What is the National Minimum Wage (NMW) an example of?
A minimum price
What is necessary for the NMW to be effective?
It must be set above the free market price
What impact does the NMW have on employment rates according to the theory?
Leads to a fall in employment rate Q1-Q3
What are some positive externalities of the NMW?
- Increases standard of living of the poorest
- Provides an incentive for people to work
What is a potential downside of the NMW for young people?
It could make it harder for them to find jobs due to lack of experience
What is one reason for pay gaps in the labour market?
Discrimination based on gender or other factors
What factors can lead to discrimination in the labour market?
- Formal education
- Skills qualification and training
- Pay gaps
- Wages and skills
- Gender
