The Labour Market

Question 1

What type of demand is labour?

Answer 1

Derived demand

Question 2

What does the marginal productivity theory say?

Answer 2

The demand for any factor of production depends on its marginal revenue product (MRP)

Question 3

What is marginal revenue product?

Answer 3

The extra revenue gained by the firm from employing one more worker

Question 4

What is the formula for marginal revenue product?

Answer 4

MRP = MPP X MR

Question 5

What is the marginal physical product of labour(MPP)?

Answer 5

The output produced by each additional worker

Question 6

What is the marginal cost of labour?

Answer 6

The cost of hiring one additional worker

Question 7

When does a firm have an optimal number of workers?

Answer 7

When MRP of labour is equal to MC of labour

Question 8

When is a firm employing too few workers?

Answer 8

When MRP of labour is greater than MC of labour

Question 9

When is a firm employing too many workers?

Answer 9

When MRP of labour is less than MC of labour

Question 10

What is a firm’s demand for labour generally affected by?

Answer 10

Productivity

Question 11

What do high unit costs suggest?

Answer 11

There is low productivity

Question 12

What is an individual’s labour supply?

Answer 12

The total number of hours which that person is willing to work at a given wage rate

Question 13

What is the labour supply for an occupation?

Answer 13

The number of workers willing to work in that occupation at a given wage rate

Question 14

What is supply of labour in the long run determined by?

Answer 14

Monetary and non-monetary factors

Question 15

What is a monetary benefit?

Answer 15

The welfare a worker gains from the wage they receive

Question 16

What is a non-monetary benefit?

Answer 16

Welfare a worker can gain from non wage benefits of the jobs. For example, employee discount, flexible working hours

Question 17

What factors can affect supply of labour?

Answer 17

-Working population
-Competitiveness of wages
-Publicising of jobs opportunities

Question 18

What type of job is supply of labour elastic for?

Answer 18

Low skilled jobs

Question 19

What type of job is supply of labour inelastic for?

Answer 19

Skilled jobs

Question 20

What are wage differentials?

Answer 20

The differences in wages between different groups of workers, or between workers in the same occupation

Question 21

What are the the reasons for wage differentials?

Answer 21

• Amount skill required
• Region
• Trade Unions

Question 22

What is a trade union?

Answer 22

An organisation formed to represent the interests of a group of workers

Question 23

What are the aims of a trade unions?

Answer 23

Bargain with employers for:
- Better pay
- Better working conditions
- Job security

Question 24

What are productivity bargains?

Answer 24

When unions agree to specific changes that will increase productivity in return for higher wages or other benefits

Question 25

What is a downside of trade unions?

Answer 25

The negotiations for better wages may lead to increase unemployment, as firms cannot afford to keep all the workers at the increased wage

Question 26

What is wage discrimination?

Answer 26

When employers with monopsony power pay different wage rates based on different workers willingness to supply labour

Question 27

What is labour market discrimination?

Answer 27

When workers are being discriminated against for differences in things like gender or race

Question 28

What are the advantages of wage discrimination?

Answer 28

- Costs get lower, meaning increased demand for labour, providing more jobs - Reduces the cost of wages, which can lead to higher profits

Question 29

What are the disadvantages of wage discrimination?

Answer 29

- Can lead to exploitation of vulnerable workers - Additional administration for employers - Inequality

Question 30

What happen to employers as a result of discrimination?

Answer 30

They incur increased costs

Question 31

What happen to the government as a result of discrimination?

Answer 31

Worker have lower wages so they can pay less tax, which decrease tax revenue for the government

Question 32

What is the national minimum wage?

Answer 32

A legal minimum hourly rate of pay for different age groups

Question 33

What are the advantages of a national minimum wage?

Answer 33

- Help those on low incomes, reduce poverty - Boost morale of workers as they are getting better wages - Greater incentive to become employed - Government tax revenue is greater

Question 34

What are the disadvantages of a national minimum wage?

Answer 34

- Increase wage costs, increased unemployment - Decrease competitiveness of UK firms that have higher wages compared to firms in other countries with lower wages - Increased wage costs may be passed on to price, inflation increase

Question 35

What are the two types of labour market?

Answer 35

Perfectly competitive & Monopsony