week 3

Question 1

real wage

Answer 1

• nominal wage measured relative to the general price level

Question 2

increase in goods relative price

Answer 2

• price of computers increase
• value of marginal product of labour increases
• firm is able to hire more workers and earn profits
• graph shifts to the right

Question 3

labour supply curve

Answer 3

• higher real wage
• greater you are willingly to supply labour
• real wage is the opportunity cost of leisure and rewards to working

Question 4

shifts in the supply of labour

Answer 4

• australia’s pension reform of postponing retirement age
• > increase labour supply
• factors which lead to changes in the share of working-age population

Question 5

increase in productivity

Answer 5

• raises real wage
• demand curve goes to the right
• real wage increases and goes up, relative to supply curve

Question 6

increasing wage inequality

Answer 6

• wages of less skilled and less educated have fallen further behind those of better trained workers
• sectoral shift
• globalisation
• technological change

Question 7

sectoral shift

Answer 7

• boom in investment -> increase in demand for labour

- causes demand for labour shift right

Question 8

globalisation and demand for workers

Answer 8

• wages in 2 industries are equal
• increase inports cause domestic production to lower wages and employment
• the exporting industry increases, raising wages and employment

Question 9

why unemployment is a problem

Answer 9

• lost incomes and production
• lost human capital
• not everyone receives unemployment benefits

Question 10

measuring unemployment

Answer 10

• employed = have a job
• unemployed = who do not currently have a job but are actively looking for work
• labour force = employed + unemployed

Question 11

unemployment rate

Answer 11

• number of ppl employed / labor force * 100

eg. 12mil in labour force
0. 6 mil unemployed

= 5% unemployment

Question 12

labour force participation rate

Answer 12

labour force / working age population

• eg. 12mil, working age 18.3
  65. 6 percent

Question 13

natural rate of unemployment

Answer 13

• no cyclical unemployment

- frictional + structural

Question 14

minimum wage laws

Answer 14

• reduction of wage prohibited by law
• unemployment last forever
• price floor

Question 15

impediments to full employment

Answer 15

• labour unions
• > call a strike, causes production, sales, profits to decrease
• > higher wages accepted

Question 16

marginal benefit

Answer 16

• value of additional worker’s marginal product
• > price of the good produced by the firm
• > workers marginal product
• -> how much production increases after an additional worker is hired

Question 17

structural unemployment

Answer 17

unemployment that results from a mismatch between skill and desired skills by businesses

Question 18

frictional unemployment

Answer 18

• arises from normal labor market turnover

- swapping of jobs

Question 19

cyclical unemployment

Answer 19

• arises from when a worker is laid off because of a recession / economy not doing well

Question 20

unemployment benefits

Answer 20

• give unemployed people more options
• increases time spent searching for an acceptable job
• increase their reservation wage
• should be set so that a) gives people more time to search but b) should not remove incentive to seek work actively