Unit 3 Flashcards
(109 cards)
1
Q
What influences the occupational choice of workers?
A
The occupational choice of workers are influenced by a range of non wage and wage factors;
2
Q
What are wage factors?
A
Wage factors are financial payments that workers receive for their labour.
3
Q
What are non-wage factor?
A
Non-wage factors incorporate a range of influences that are meaningful to a worker.
4
Q
What are wages?
A
Wages are an agreed amount of money per hour and it is calculated directly from the number of hours worked.
5
Q
What is salary?
A
Salary is an annual payment paid to workers. The amount tends to be stated in employment contracts. This is then divided by 12 and paid monthly . The hours worked monthly may vary but the pay received is always the same.
6
Q
What is commission?
A
Commission is a payment to sales people for the value of the items they sell. It is typically a percentage of the value of the transaction and can motivate employees to maximise sales.
7
Q
What is a bonus?
A
A bonus is money paid in addition to a salary and is often paid when the company earns high levels of profit, or as a reward for exceptional worker performance.
8
Q
What is piece rate pay?
A
Piece rate pay is a fixed amount paid to the employee for each completed item produced.
9
Q
What is performance related pay? PRP
A
Performance related pay are payments based on how well the worker performs.
10
Q
What are fringe benefits?
A
Fringe benefits are benefits provided in addition to the normal salary. They can be very significant in influencing occupational choices. They include benefits such as childcare, free lunches, gym membership or a company car.
11
Q
What is job security?
A
Job security is stated in employment contracts and is how long the employee works for the employer. The can be anywhere from a year to four years which provide high security.
12
Q
What is job satisfaction?
A
Job satisfaction is infixing fulfilment in a job role and enjoying work. This can be very significant when workers choose their job.
13
Q
What is status?
A
Status is the fact that some jobs carry a higher recognition in society which many workers find applying. - lawyers, surgeons.
14
Q
What is level of challenge?
A
Level of challenge is the fact that many workers step into an occupation due to the challenge of the role and enjoy that.
15
Q
What is career prospects?
A
Career prospects refers to jobs with a defined pathway for promotion (and salary increase) which tend to be more desirable and increase motivation.
16
Q
What is length of training or level of education required?
A
The longer the time period required to study or train for a job, the fewer the number of people who seek employment in that occupation.
17
Q
What is holiday?
A
Holiday refers the fact that the more holiday a job has, the more desirable it may seem to many.
18
Q
What is the labour market composed of?
A
The labour market is composed of sellers (suppliers) of labour (households) and buyers of labour (firms).
-workers supply their labour and firms demand labour.
19
Q
What is derived demand?
A
Derived demand is when any factor of production is demanded for the product it is used to produce.
20
Q
How is demand for labour a derived demand?
A
Demand for labour is a derived demand meaning that labour depends on the demand for goods and services.
21
Q
How does the demand for the final product influence the demand for labour?
A
As demand for labour is a derived demand, when an economy is booming and demand for goods and services tend to be high, the demand for labour will also be very high - economic growth.
Conversely, when an economy is in a recession, demand for goods and services will be very low and so the demand for labour will be low - leading to firms laying off workers and higher unemployment.
22
Q
How does the ability to substitute capital for labour affect demand of labour?
A
Firms are constantly evaluating if it will be possible and more cost effective to switch production from using labour to capital. If it is more cost effective, the demand of labour will fall and so unemployment will increase.
23
Q
How does the productivity of labour affect the demand for labour?
A
If the productivity of labour increases (e.g. through training) this will lower the average costs and firms will likely demand more labour.
24
Q
How does the training period affect the supply of labour?
A
Longer training periods and the costs of them act as a barrier to the entry of many workers to the labour market. This excludes many households from offering labour in certain markets. However, the longer the training periods, the more skilled the employees tend to be and thus improving the quality.
25
How do wages in other occupations impact the supply of labour?
Comparative wage rates in substitute labour markets strongly influence the supply of labour.
26
How do changes in migration policies affect the supply of labour?
Policies that tend to increase the net migration rate can increase the supply of labour in certain industries.
Net immigration = Immigration - emigration. (number of immigrants in a country).
27
How do income tax levels affect the supply of labour?
At a certain level, income taxes become a disincentive to households offering they labour. If income tax increases, workers will feel disincentivised to work and thus the supply of labour decreases.
28
How does the price of the product being produced affect the demand for labour?
If the selling price of the product increases, then the firm will be incentivised to supply more (to prevent shortage) and thus the firm's demand for layout will increase.
29
How does trade union power influence the supply of labour?
Trade unions can increase the supply of labour to certain industries as workers consider the benefits of benefits of belonging to the union. - higher wages and a safer working environment.
30
How does the level of welfare benefits affect the supply of labour?
The higher the level of welfare benefits, the lower the incentive for low-skilled labour to offer their labour. This is because they can live off the welfare benefits.
31
How do social trends affect the supply of labour?
Social trends include any major changes within society and can influence the supply of labour to certain industries.
-Work from home during covid resulted in significant changes in the labour market and not all workers returned to work when economies opened up again.
32
What is bargaining power?
The ability of a person or group to get what they want. The more bargaining power an employee has, the more likely the employer will have to comply to their requests.
33
What factors influence the bargaining power of workers?
-Membership of a trade union.
-Age and experience.
-Level of education.
-Current supply and demand conditions.
34
How does membership of a trade union impact the bargaining power?
Trade unions tend to have more bargaining power and they use it to represent the interests of the workers in negotiations with the employer.
35
How does age and experience impact the bargaining power?
Young and inexperienced workers tend to have less bargaining power than older, more experienced workers. As workers grow older, their age often begins to count against them because they are less productive and often nearing retirement, thus their bargaining power is reduced.
36
How does the level of education impact the bargaining power?
Education provides higher levels of skills and specialisation to a worker. This means that they are more important to business and thus have a higher bargaining power relative to unskilled workers.
37
How do the current supply conditions impact the supply of labour?
The supply of labour in many industries can change due to socio-political conditions. E.g. if there is suddenly a shortage in the labour willing to work in hotels, the bargaining power of the current hotel workers increases since they are in higher demand.
38
How do working conditions affect the supply of labour?
The working conditions and non-wage benefits can influence many people in many industries. If conditions are very good, more workers will want the job.
39
What are minimum wages?
Governments often intervene in the labour market by setting a minimum wage. They do this to improve equity and to reduce the exploitation of workers.
A minimum wage is a legally imposed wage level that employers must pay their workers.
40
What are reasons for differences in earnings (wage differentials)?
-Gender pay differences
-Industrial sector pay differences
-Public and private sector pay differences
-Differences in pay between skilled and unskilled
41
What are the reasons for wage differentials between men and women?
-Men may work full-time whereas women often work part-time in order to meet the demand of motherhood or childcare.
-Men tend to have an uninterrupted career journey whereas women may take time away from work for motherhood and their family and as a result, may miss opportunities for advancement.
-Women are more likely to accept a job below their skill or qualification level if it fits with the needs to looking after their children.
-The gender pay gap is a form of discrimination and is when a woman is paid less than a man who is doing exactly the same job.
42
What are the reasons for wage differentials in the primary, secondary and tertiary sectors?
In the primary sector, workers tend to be paid lower wages due to the unskilled nature of the job and the fact that raw materials often generate the lowest profits in the production chain. Moreover, this extraction of raw materials tends to occur in LEDC's where workers are exploited for their labour - by firms.
-In the secondary sector, workers add value to the raw materials and then sell these products for higher profits. Therefore, wages tend to be higher than primary sector wages.
-In the tertiary sector, workers are paid the highest. This is because their jobs require the most skills that are also very valued and often take years to acquire.
43
What are reasons for wage differentials between private and public sector workers? (private sector).
In the private sector:
-Salaries can be extremely high, especially if the value of the goods or services is high and the workers are productive.
-Some salaries can be very low as firms seek to cut costs and maximise profits. =exploitation of workers often in poorer countries.
-There tend to be many wage benefits provided that are better than those provided by the public sector. E.g. bonuses and fringe benefits.
44
What are reasons for wage differentials between private and public sector workers? (public sector workers)
-Wages will reach a maximum ceiling that is often below what the private sect may offer.
-Job security tend to be very high and results in long careers with defined pathways for promotion.
-Pensions are often very good, but are limited in comparison to private sector pensions.
-Wages do not fall as low as some private sector jobs as many public sector jobs belong to trade unions.
45
What are the reasons for wage differentials between skilled and unskilled workers?
-Economies tend to have a high supply of unskilled labour. This means that employers can push wages down as there is always someone willing to work for less.
-To become skilled workers takes lots of time and money meaning that there is a more limited supply of skilled workers and are thus in higher demand. This means employers are willing to agree to their demands as well as pay them higher wages to keep them.
46
What is specialisation?
The process wherein a firm or individual decides to focus they labour on a specific type of labour.
47
What is division of labour?
Division of labour is when production or a task is broken up into several component tasks.
48
What are the advantages of specialisation for workers?
-Workers can acquire the single skill required and gain immense expertise in this area.
-Workers can gain recognition and Statius for performing their skill well.
-If the workers are payed in piece rate, earnings may increase.
-Job security since businesses do not want to train a specific task again to another employee.
-Reduces the chance of making mistakes, thus workers not dismissed.
49
What are the disadvantages of specialisation for workers?
-The work can become repetitive and boring.
-Workers can become occupationally immobile.
-In the future, employees may find it difficult to find jobs because they have limited skills.
50
What are the advantages of specialisation for a firm?
-Time spent training new workers tends to be quite short.
-Increased output allows firms to generate more profit.
-Efficiency and productivity of workers increases which lower the cost per unit, making the products more competitive in domestic and global markets.
-Since workers are specialised in that task, the quality of the products may increase.
51
What are the disadvantages of specialisation for a firm?
-Hard to cover absences of employees. The production process may stand idle or slow down.
-Labour turnover may be high as workers are seeking for newer and interesting opportunities elsewhere.
-They will have to spend resources on training new employees constantly.
-Workers get bored and thus the quality and quantity could fall, as well as more mistakes being made.
-
52
What are the advantages of specialisation for an economy?
-Increased exports due to efficiency of employees and lower costs and prices can result in economy growth for the nation.
-Economic growth leads to higher income and improved standard of living.
-More consumer choice;
-Specialisation opens up new labour possibilities thus reducing unemployment;
53
What are the disadvantages of specialisation for an economy?
-If a firm shuts down, employees who have limited skills except that specific tasks will struggle finding jobs. Thus higher unemployment, especially frictional.
-Production can be unstable in someone is sick for a very long time, thus affecting output.
-Reduces the creative instinct of people.
54
What is a trade union?
A trad union is an organisation that represents the interest of its workers in negotiations with a firm's management or owners.
55
What is a general union?
These represent skilled and unskilled workers in any industry.
56
What is an industrial union?
These represent workers in the same industry.
57
What is a craft union?
These represent skilled workers with a specific trade.
58
What is a white collar union?
These represent professional office based workers.
59
What are the roles of trade union?
-Improving work conditions.
-Negotiating wages and benefits with employers.
-Bargaining.
-Defending employees' rights and jobs.
-Supporting members taking industrial action.
-Improving pay and other benefits such as holiday entitlement.
-Influencing govt policy.
60
What are the benefits of union membership?
-Collective bargaining
-Job-specific training
-Legal representation in disputes
-Discounts on a wide range of goods and services.
61
What are the different types of industrial action workers can take?
-Strikes
-Overtime bans
-Work to rule
-Go-slows
62
What are the factors influencing the strength of trade unions?
-The unemployment level - the higher it is, the weaker the bargaining power as firms can easily replace existing workers.
-Wage levels as proportion of total costs - the higher the percentage of total costs that a firm's wages represent is the lower the bargaining power.
-The level of profits - the higher the profit, the stronger the union's bargaining power.
-State of the economy - less bargaining power when in a recession and more when economy booming.
-Overall size of trade union.
-Productivity of labour
63
What are the pros of trade unions for workers?
-Workers no longer need to negotiate with management on their own as they benefit from collective bargaining.
-Workers receive netter pay than non-unionised workers.
-Workers enjoy better working conditions than non-unionised workers.
-Workers enjoy better non-wage benefits than non-unionised workers.
-Workers receive specialised job training and free legal advice from the union.
64
What are the cons of trade unions for workers?
-Industrial action is stressful as it is a conflict between workers and management.
-Workers do not get paid while on strike.
-Strike action disrupts the economy and can upset other people in the economy.
-Individual workers may not agree with specific demands made by the trade union on behalf of all the brokers and yet are pressures to support the collective action. -action binding on all.
65
What are the pros of trade unions for firms?
-Training from the trade union increases worker productivity and skills, thus decreasing costs.
-Empowerment in the work place improves employee motivation leading to lower absenteeism and labour turnover as well as greater output for the firm.
66
What are the cons of trade unions for firms?
-Trade unions increase the costs of production which may reduce output and profits.
-Management styles have to be more inclusive and less authoritarian which many find difficult.
-Including unions in decision-making increases the time period taken to implement the changes and can be detrimental to effective competition.
67
What are the pros of trade unions for the economy/govt?
-Trade unions create a more equal and prosperous society.
-Higher wages increases consumer spending and may lead to economic growth.
-If firms' profits increase due to increased productivity, govt will receive more corporation tax.
-higher wages mean that the workers may reach the other tax bracket which leads to more income tax for the govt, this spending on public an merit goods increase, reducing chance of market failure.
68
What are the cons of trade unions on the economy/govt?
-Industrial action reduces output, lowers firms' profits, thereby lowering the potential corporation tax collected by the govt.
-Industrial action and obeying trade unions' demands increases the costs of production thus increases prices and may reduce the competitiveness of products in the global market and so reduce exports.
-Strike action is often very disruptive to many peoples lives, especially in the primary sector. It can also reduce output - GDP.
-Govts may struggle finding multinational companies to invest if industrial action occurs regularly.
-MNC's will be reluctant to invest in strongly unionised economies at the costs of production will be higher.
69
How can firms be classified?
-The different economic/industry sectors such as primary, secondary, tertiary and quaternary.
-The sector it is in such as private or public.
-The relative size of the firm such as the number of employees, market share, value of sales and value of capital employed.
70
Why do small firms exits?
-Personalised service
-Owner’s choice
-Loans are hard to access - they lack capital
-Niche market
-Mass markets
-Diseconomies of scale
-The firms' objectives
71
What are the advantages of small firms?
-Offer highly customised goods and services which tend to generate high prices.
-Often create personal relationships with their customers to help generate customer loyalty and word-of-mouth advertising.
-Provide very unique products which are sold at small quantities but at very high prices.
-Smaller firms can respond quickly to changing market conditions.
-Smaller fries tend to have lower costs of production since they may need smaller and less premises.
72
What are the disadvantages of small firms?
-Cannot benefit from economies of scale.
-Less financial resources available to them such as loans, selling shares.
-Harder to recruit and retain staff as the wage and nonage benefits are less competitive than those offered by bigger firms.
-Owners struggle to take a holiday or sick leave as revenue may stop or slow down when they stop.
-Vulnerable to takeover.
-More susceptible to changes in the wider economy than larger firms.
73
What is organic growth?
Organic growth is internal growth meaning growth is generated by
-gaining larger market share
-product diversification
-opening a new store
-international expansion
-investing in new technology
74
What are the advantages of organic growth?
-Pace of growth is manageable.
-Less risky as growth is financed by profits and there is expertise in the industry.
-Avoids diseconomies of scale.
-The management know and understand every part of the business.
75
What are the disadvantages of organic growth?
-Pace of growth can be slow and frustrating.
-Not necessary able to benefit from economies of scale.
-Access to finance may be limited.
-Firms using inorganic methods will be faster and gain a larger market share quicker.
76
What is vertical integration?
Vertical integration involves a merger or takeover from a firm further forward or backward in the supply chain.
E.g. A dairy farmer merges with an ice-cream manufacturer or opposite.
77
Advantages of vertical integration?
-Lower costs make the firm more competitive.
-Greater control over the supply chain reduces risk as there is larger and more certain access of raw materials.
-Reduces costs of production as middle man profits are eliminated. -reduces the channels of distribution.
-Quality of raw materials can be controlled.
-Increases the brands visibility.
78
Disadvantages of vertical integration?
-Diseconomies of scale occurs as costs increase e.g. unnecessary duplication of management roles
-There can be a culture clash between the two firms that have merged
-Possibly little expertise in running the new firm results in inefficiencies
-The price paid for the new firm may take a long time to recoup
79
What is horizontal integration?
Brings together two firms in the same industry and also in the same sector of business.
E.g. two banks that are both in tertiary sector.
80
Advantages of horizontal integration?
-Rapid increase of market share
-Reductions in the cost per unit due to economies of scale
-Reduces competition
-Existing knowledge of the industry means the merger is more likely to be successful
-Firm may gain new knowledge or expertise
81
Disadvantages of horizontal integration?
-Diseconomies of scale may occur as costs increase e.g. unnecessary duplication of management roles
-There can be a culture clash between the two firms that have merged
-May have to make many workers redundant as they are no longer needed
82
What is conglomerate integration?
Brings together two businesses in completely different industries.
83
Advantages of conglomerate integration?
-Reduces overall risk of business failure
-Increased size & connections in new industries opens up new opportunities for growth
-Parts of the new business may be sold for profit as they are duplicated in other parts of the conglomerate
84
Disadvantages of conglomerate integration?
-Possible lack of expertise in new products/industries
-Diseconomies of scale can quickly develop
Usually results in job losses
-Worker dissatisfaction due to unhappiness at the takeover can reduce productivity
85
Internal economic of scale
Financial Economies
Managerial Economies
Marketing Economies
Purchasing Economies
Technical Economies
Risk-bearing Economies
86
Diseconomies of scale
Management Diseconomies
Communication Diseconomies
Geographical Diseconomies
Cultural Diseconomies
87
What is labour-intensive production?
Labour-intensive means that the proportion of labour costs are higher than the other factors of production, including machinery
88
What is capital-intensive production?
Capital-intensive means that the proportion of machinery costs are higher than any of the other factors of production, including labour
89
Advantages of labour-intensive production
-The firm can adjust the number of workers hired as demand for its goods/services fluctuate
-Depending on the industry, workers can build meaningful connections with customers which helps to create customer loyalty e.g. restaurant waiters versus iPad ordering
-Workers can generate new ideas & offer suggestions on how processes can be improved
90
Disadvantages of labour-intensive production
-There may be periods where worker productivity is low
-The firm may find it difficult to recruit workers when needed & letting go of staff when they are not required is unpopular
-The more skilled the labour required, the higher the wage bill for the firm will be
-Each worker requires both wage & non-wage benefits, which can prove expensive for the firm
-Workers can get ill & then are unavailable for work
91
Advantages of capital intensive production?
-Production can continue 24/7 with only short breaks so as to allow for machinery maintenance
-Machinery cuts down on human error & product quality remains consistent
-Absenteeism or a shortage of skilled workers are non issues with capital-intensive production
-The firm can reduce average costs as it benefits from technical economies of scale
92
Disadvantages of capital-intensive production?
-The cost of purchasing & installing new machinery can be very high (but is often financed with a bank loan & paid off over a period of years)
-Most machinery cannot improve processes, although artificial intelligence innovation is changing this
-Switching capital for labour negatively impacts both the workers who lose their job & also the morale of the workers left behind
-Once the machinery is installed, it can be difficult for the firm to respond to changing customer tastes/fashions which require product changes
93
What is production?
Production is the process of generating output of goods and services.
94
What is productivity?
Productivity a measure of the efficiency by calculating the amount of output put unit of input.
95
Benefits of productivity?
-Lowers costs and improves a firms national & international ability to compete
-It allows firms to produce more output with the same input which puts it in a position to generate increased economies of scale
-Firms can generate higher profits
-Higher profits means higher corporation tax for govt, more spending on public and merit goods
-Improved ability to compete in international markets will generate economic growth.
96
How to increase productivity?
-Innovation
-Investment
-Training
-Competition
-Entrepreneurial freedom
97
What is a competitive market?
A market with extremely high degrees of competition.
98
What are the objectives of firms?
-Profit maximisation
-Growth
-Survival
-Social welfare - CSR
99
What are the characteristics of competitive markets?
-Many buyers and sellers
-No barriers to entry and exit from the industry
-Buyers and seller possess perfect knowledge of prices
-The products are homogenous meaning firms are unable to build brand loyalty as perfect substitutes exist and any price change will result in losing customers.
100
What are the benefits of a competitive market?
-Lots of consumer variety and choice
-Prices are low (competitive pricing) high demand
-Efficiency is very high to keep production costs as low as possible. If they aren’t efficient, they would become less profitable. This will cause them to raise prices which would discourage consumers from buying their product. Inefficiency could also lead to poor quality products.
101
What are the disadvantages of a competitive market?
-Wasteful competition: in order to keep up with other firms, producers will duplicate items; this is considered a waste of resources.
-Mislead customers: to gain more customers and sales, firms might give false and exaggerated claims about their product, which would disadvantage both customers and competitors.
-Worse quality: in a bid to lower prices, product quality may actually deteriorate over time
-Too much choice: consumers may be overwhelmed & not explore the full range of market offerings, instead sticking to what they know
-Worker welfare: the greater the competition the greater the need to cut costs, often resulting in low wages & poor working environments
102
What are monopoly markets?
A market structure in which there is a single seller. There are no substitutes and the seller has complete market power.
There are high barriers to entry exist.
103
What are the characteristics of monopoly markets?
-Earns abnormal profits
-Has 100% share of market
-High barriers to entry and exit making it extremely difficult for other firms to compete.
-Is a price maker - can vary supply to change the price.
104
What are the advantages of a monopoly to the firm?
-Large profits generate money for continued investment in technology & product innovation
-Market power enables the firm to increase its global competitiveness
-Economies of scale can increase thereby lowering the average cost
-Price discrimination: the firm can charge consumers different prices based on the different price elasticity of demand for the product e.g. peak (inelastic) & off-peak (elastic) travel on trains
105
What are the disadvantages of a monopoly to the firm?
-Due to a lack of competition, there is a reduced incentive to be efficient
-Cross subsidisation can create inefficiencies
-Monopolies lead to a misallocation of resources as they limit supply in order to increase price
-Due to a lack of competition, innovation sometimes lacks effectiveness
106
What are the advantages and disadvantages of a monopoly to the workers?
+Large profits often result in higher wages
-Having only one supplier in the industry limits the opportunity to change employers
107
What are the advantages of a monopoly to consumers?
-Product innovation due to the firm's large profits may result in a better-quality product
-Cross subsidisation can lower prices on some products that the firm provides
-Prices may fall If firms pass on their cost savings to consumers (due to economies of scale) in the form of lower product prices
108
What are the disadvantages of a monopoly to consumers?
-A lack of competition is likely to result in higher prices as no substitute goods are available
-A lack of competition may result in no product innovation & worse product quality over time
-May experience worse customer service as the incentive to improve it is limited
-Cross subsidisation is likely to increase prices on some products offered by the firm
109
What are the advantages and disadvantages of a monopoly to suppliers?
+Increased sales volume for some suppliers as they are able to supply products that are distributed nationally or internationally
-There is less competition for their products & a monopoly often has the power to dictate what price they will pay to suppliers
