T3 LABOUR MARKETS

Question 1

What are the three main factors that affect elasticity of labour demand?

Answer 1

Substitutes

% of Total Cost

Time

Question 2

How do substitutes affect the elasticity of labour demand?

Answer 2

If workers are easy to substitute/replace, demand will be elastic.

If workers are hard to substitute/replace, demand will be inelastic.

Question 3

How does % of total cost affect the elasticity of labour demand?

Answer 3

If wages make up a small % of total cost, any increase in wage will have a small impact, so demand for labour will be unresponsive and therefore inelastic.

Question 4

How does time affect the elasticity of labour demand?

Answer 4

In the short run, without enough time to search for substitutes, firms won’t be able to respond much so demand for labour will be inelastic.

In the long run there’ll be enough time to search for substitutes, firms will be able to respond more so demand for labour will be elastic.

Question 5

If demand is inelastic, how does that affect wages

Answer 5

If demand is inelastic, we’ll see higher wages.

Question 6

What are the three main factors that affect elasticity of labour supply?

Answer 6

Skills & Qualifications

Unemployment

Time

Question 7

What is derived demand

Answer 7

demand for a factor of production (like labour) that is derived from the demand of another good/service.

Question 8

What are non-pecuniary benefits

Answer 8

are all the benefits of a job other than the wage you’re paid to do it.

Question 9

What are some example non-pecuniary benefits

Answer 9

Job satisfaction, company holidays/parties, company car

Question 10

How can the nhs offer such low wages to doctors

Answer 10

NHS owns 90% of the UK healthcare industry, making them a monopsony.

Question 10

What is a monopsony

Answer 10

When there is only one buyer in a market

Question 11

Explain how a monopsony can reduce the wages it pays its workers. (3)

Answer 11

A monopsony is when there’s only one buyer in the market

A monopsony can reduce the wages it pays its workers and the workers will have no choice but to accept, because they have nowhere else to work.

Question 12

What is the national minimum wage

Answer 12

The lowest wage employers can legally hire a worker for.

Question 13

What does a national minimum wage placed above equilibrium lead to

Answer 13

Excess supply/unemployment

Question 14

What are the two results of implementing a national minimum wage

Answer 14

Higher wages for employees but decreased employment

Question 15

What are trade unions

Answer 15

A trade union is a group of workers who collectively bargain to improve employee welfare.

Question 16

What is a maximum wage

Answer 16

The highest wage employers can hire a worker for

Question 17

What does a maximum wage set below equilibrium wage lead to

Answer 17

Excess demand / shortage

Question 18

What are the two results of a maximum wage

Answer 18

Lower wages for employees and labour shortages

Question 18

What does occupational immobility of labour often lead to:

Answer 18

Structural unemployment

Question 19

what are 3 ways the government can intervene to improve occupational mobility

Answer 19

Education

training

apprenticeships schemes

Question 19

What is occupational immobility

Answer 19

Occupational immobility is when workers can’t move between different jobs because they lack the skills needed.

Question 20

What is geographical immobility

Answer 20

Geographical immobility is when workers struggle to move between different areas.

Question 21

What are the causes of labour market failure

Answer 21

Occupational immobility

Geographical immobility

Question 22

How can the government intervene to fix geographical immobility

Answer 22

Improving transport Relocation subsidies

Question 23

explain how unemployment levels in an economy affect the wage elasticity of demand (3)

Answer 23

High unemployment makes labour supply more elastic in response to rising wages. Explanation: If there are many unemployed workers with relevant skills, they can quickly take up jobs when wages rise. Conclusion: More available labour = higher elasticity. Low unemployment = fewer available workers = lower elasticity.

Question 24

How do skills and qualifications affect the elasticity of labour supply

Answer 24

In markets where workers require few skills or qualifications, supply will be elastic. E.g Becoming a McDonald’s worker. If McDonald’s offers higher wages, it’ll be super easy for new workers to become McDonald’s employees In markets where workers require lots skills or qualifications, supply will be inelastic. E.g Becoming a heart surgeon. If the NHS increased salaries for heart surgeons massively, potential new surgeons would need to go through 15 years of training

Question 25

How does time affect the elasticity of labour supply?

Answer 25

In the short run, without enough time to apply or train for jobs, workers won’t be able to respond much so supply of labour will be inelastic. In the long run, there’ll be more time apply and train for jobs, so workers will be able to respond more so supply for labour will be elastic.

Question 26

how does productivity affect the demand for labour

Answer 26

Increases - workers are more productive they can produce more goods and make more revenue for the firm so demand for labour would shift out. Decreases - Firms may require less workers for a given task as they have become more productive, therfore they would want to employ less workers shifitng demand inwards.

Question 27

how does migration affect the supply of labour

Answer 27

migration into a country increase the availability of workers for a given job role shifting the supply of labour outwards.