The Labour Market Flashcards
Derived demand
Demand that come from the demand for something else eg more demand for product more demand for labour
Marginal revenue product of labour (MRPL)
Is the extra revenue generated when an additional workers employed
MRPL formula
Marginal product of labour x marginal revenue
Number produced x price
Profit maximisation point
MC=MR
Marginal revenue product
The demand of workers to work
Higher wage higher motivation to work too high and workers will. Or work as much to earn same amount
Evaluating marginal revenue product
Measuring labour efficiency/productivity can be difficult
Collaborative work makes it difficult to establish productivity of individual workers
Many have ability to set their own pay
Factors influencing demand for labour
Wage rate
Employment tax
Productivity
Profitability of firms
Demand for labour
Shows the amount of labour forms are willing to employ at a given wage rate
Labour supply
Number of workers willing and able to work multiplied by the hours they are willing and able to work
Elasticity in respect to skill level of jobs
Higher skilled inelastic
Lower skilled elastic
Factors affecting supply of labour
Wage rate
Substitute industries
Tax and benefits
Size of working population mobility of labour
Substitute affect
A higher wage makes work more attractive than leisure
Income effect
States a higher wage means workers can achieve target income by working fewer hours
Benefits of minimum wage
Reduces poverty
increases productivity
Higher incentive to work
Problems with minimum wage
Regional variations in wages
Higher wage passed back onto customers
More workers being stuck on minimum wage
Poorest don’t benefit (people on benefits)
