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A Level Economics (MICRO) > The Labour Market > Flashcards

The Labour Market Flashcards

(57 cards)

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1
Q

What is meant by the derived demand for labour?

A

Labour is not demanded for the workers themselves, but for what they can produce and what the output can be sold for

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2
Q

What happens to marginal output as more workers are employed

A

The law of diminishing returns

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3
Q

What is the marginal physical product of labour

A

Amount of additional output produced if the firm increases its labour input by one unit

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4
Q

What is marginal revenue

A

The change in revenue that results from producing one more unit of output

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5
Q

What do firms based the demand for labour on

A

The marginal revenue product of labour

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6
Q

Where is profit maximise in the labour market?

A

MRPL = MCL

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7
Q

What are the factors that affect demand for labour in an industry?

A
  • change in the price of labour
  • an increase in the productivity of workers
  • increase on the price of the products or decrease
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8
Q

What is the wage elasticity of demand for labour?

A

Measures the responsiveness of quantity demanded of labour given a change in the wage rate

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9
Q

Formula for wage elasticity of demand a labour

A

percentage change of qd of labour

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10
Q

What does affecting the wage elasticity of demand of labour?

A
  • the ease of factor substitution
  • the share of labour costs to total costs
  • the ped of the product: elastic-elastic
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11
Q

degrees of elasticity of demand of labour

A
  • more labour intensive has wage elastic demand
  • more capital intensive has wage inelastic demand
  • unskilled jobs have elastic demand
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12
Q

Why are labour costs important for firms

A
  • they account for a high proportion of labour costs
  • lowering them can affect price competitiveness
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12
Q

the significance of demand for labour

A
  • inelastic demand increases trade union bargaining power
  • elasticity of demand must be taken into account when determining the minimum wage
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13
Q

What are unit labour costs

A
  • the average cost of labour needed to create one unit of output
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14
Q

What does labour costs depend on

A
  • the wage paid
  • the productivity of labour
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14
Q

What is labour productivity

A

a measure of output per worker per hours worked

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15
Q

What are the influences on labour productivty

A

-skills and training
- organisation of production process - can allow d of l
- availability of complementary factor inputs

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16
Q

ways to improve labour productivity

A
  • piece rate
  • performance related pay
  • bonuses
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17
Q

What is the supply of labour

A

total hours that labour is willing to supply at a given rate

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18
Q

What is the short run supply of labour?

A

The time period when there is insufficient time for an individual to change their job

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19
Q

What is the income substitution effect?

A

Look at revision guide
- The opportunity cost of choosing leisure of work as the wage rises increases

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20
Q

in the short run, what will influence a worker to produce less or more?

A

The wage rate

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21
Q

What is the substitution effect?

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A

If pay increases, the opportunity cost of not working increases
- Workers will substitute work for leisure

22
Q

What is the income affect?

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A

The higher an individuals income is the less they will want to work

23
Explain the relationship between the substitution and income effect
The two effects work against each other
24
What is the long run supply of labour?
There is time for people to change their occupations
25
Factors influencing the position of the supply curve of labour
- The wages in other occupations - The skills needed for the job - non-pecuniary benefits (non financial) - may accept lower wage with better conditions
26
What are net benefits?
Pecuniary plus non-pecuniary factors
27
What is the wage elasticity of supply?
The responsiveness of the quantity of labour supplied given a change in the wage rate
28
Factors influencing the wage elasticity of supply
- Availability of labour: if there is unemployment workers are more likely to take up jobs - Availability of labour in other occupations - skills needed - Qualifications needed - The immobility of labour
29
What are transfer earnings?
The minimum payment needed to keep a factor of production in its present
30
What is economic rent?
The payment over and above the minimum needed to keep the factor of production in its current use - Difference between payment and transfer earning
31
What causes shifts in demand for labour?
- Productivity improves or falls - Selling price increase increases or decreases - Price of capital increases or decreases
32
What are shifts in supply of labour caused by?
- Relative wages in other industries - Increase or decrease in availability of complimentary factors - Increase or decrease in the number of workers in the population
33
What is a wage differential?
Differences in wages between workers
34
What are the reasons for wage differential?
- differences in the revenue creation of workers - Differences in the level of skills and qualification needed - Differences in labour productivity - Differences in the conditions of work - Labour is not perfectly mobile
35
What is labour market failure?
The labour market forces of supply and demand fail to result in an economic efficiency of labour
36
What are the different types of labour market failure?
- Shortage of labour due to skills shortage - disEquilibrium due to the wage rate being above or below the equilibrium rate - Abuse of market power by monopsonies - abuse of market power by trade union
37
What is a monopsony?
A firm has market power in employing factors of production - Known as the single buyer of labour
38
Examples of real life monopsonies
The government in its employment of civil servant nurses teachers and the police
39
What are the disadvantages of a monopsony ?
On diagram: - need to lower wages for workers ,less workers are employed and they are paid less than the marginal revenue product - Firms with monopoly power often have a degree of monopoly selling power - They may also tell us about working conditions because workers don’t have any alternative
40
When can a monopsony be good?
- when demand for labour is INelastic - when supply of labour is elastic - If trading power exists
41
What is the trade union?
An organisation of workers who combine together to further their own interests - They do this to collective bargaining power - Assume it’s a closed shop
42
What are the key objectives of trade union?
- Wage bargaining - Improvement of working conditions - Security of employment for their members
43
What can trade unions do to achieve their aim?
- Limit supply of workers in an industry - Negotiate successfully higher wages for members
44
What is the closed shop?
A firm can only employ workers who belong in the union
45
Arguments or trade unions
- Redress the balance of market failure caused by monopsony - cooperate with employers to improve efficiency - Give workers job security - Increase productivity in economy
46
Arguments against trade unions
- they cause unemployment - they saw on the way of dynamic efficiency - Create an efficiency and labour markets
47
What is a bilateral monopoly?
The existence of a monopoly and the trade union
48
what is labour market flexibility?
When the labour market adjust quickly and smoothly to changes in demand and supply conditions
49
How does increase in labour market flexibility impact firms?
- Can respond quickly to changes in market conditions - Can reduce costs - Can get rid of surplus workers easily
50
How does an increase in labour market flexibility impact workers?
-Increase in part-time work - Can lead to greater job insecurity and stress - Part-time stuff for may not sufficient training - Greater choice of work - Possibility of a second income
51
What is occupational mobility of labour?
The ability to move from one occupation to another
52
How can occupational mobility of labour be improved?
Investment in training schemes for the unemployed to boost the human capital and give them skills
53
What is geographical mobility of labour?
The ability of workers within a specific economy to relocate to find new or better employment
54
What are the causes of geographical immobility of labour?
- cost of moving - Lack of information - Social reasons
55
Ways to improve labour market flexibility
Improve occupational and geographic mobility - Trade union reform Legislation Improve training skills 

A Level Economics (MICRO) (10 decks)

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