The labour market 4.16 Flashcards
(13 cards)
What is derived demand?
When the demand for a good or service exists because it is an input into the production of another good or service
What type of demand is labour?
Derived demand
What is the MPP (Marginal Physical Product)
The addition to the firm’s output resulting from employing one more person
What is the MRP (Marginal Revenue Product)
The addition to the firm’s revenge resulting from employing one more person
Why do firms demand labour?
because there is a demand for the output that labour produces
What wage rate will a rational firm pay employees?
the value of the marginal revenue the employees generate
What causes a shift in a firm’s demand curve for labour?
Changes in:
.Demand for the product or service produced
.Productivity of workers
.The price of other factors of production that could replace labour
.Supplementary labour costs
What determines the (wage) elasticity of demand for labour?
Time
Availability of substitutes
Price elasticity
The proportion of labour cost to total cost
What determines the supply of labour to a particular occupation?
Monetary factors (relating to money)
Non monetary factors e.g. Job satisfaction, Job security, convenience etc
What causes a shift in the market supply curve for labour?
Changes in:
Non monetary benefits derived from working
Attitudes towards leisure time
Size of working population
Attitudes about retirement age
The proportion of people staying on in education
What determines the wage elasticity of supply of labour?
Time
Skills and qualifications required
Length of training e.g. a doctor
Sense of vocation (suited for the job)
What is the market rate determined by in a perfectly competitive labour market?
determined by the interaction of D and S for the whole industry
