Lecture 1 -Labour Supply

Question 1

What is the definition of an employed person?(E)

Answer 1

A person being paid for at least 1 hour of work a week or being unpaid for at least 15 hours of nonpaid work e.g. on a family farm

Question 2

What is the definition of an unemployed person?(U)

Answer 2

Not in work but have been actively looking for work for 4 or more weeks

Question 3

What is the Out of Labour Force? (OLF)

Answer 3

Deselected themselves from working e.g. homemaker, student, retiree

Question 4

Equation of Labour Force

Answer 4

LF = E+U

Question 5

Equation of Labour Force Participation

Answer 5

LF/Population (over 16)

Question 6

Employment rate

Answer 6

E/Pop.

Question 7

Unemployment rate

Answer 7

U/LF

Question 8

What are the faults of the definition of unemployment?

Answer 8

There can still be hidden unemployment as it doesn’t include discouraged workers who have given up on trying to find work as they aren’t “actively” searching for a job. Unemployment rate is underestimated.

Question 9

What does the indifference curve slope show us?

Answer 9

MU L(eisure)/ MU C(onsumption)
How much utility increases when leisure increases by one unit/ How much utility increases when consumption increases by one unit

Therefore it shows us how many units of consumption we need to reamin indifferent if we are giving up one unit of leisure (explaination near start of book)

Question 10

Derive the formula for the Budget Line from the Budget Constraint and Time Constraint

Answer 10

(answer near front of book