Week 5

Question 0

What is a derived demand

Answer 0

Demand for a factor of production based on the demand for the good or service that factor produces

Question 1

What type of demand is the demand for labour

Answer 1

A derived demand

Question 2

What are the 2 factors for labor demand from firms

Answer 2

1: additional units produced if a firm hires one more worker
2: additional revenue from selling that additional unit

Question 3

What is the marginal product of labour

Answer 3

The additional output produced by a firm as a result of hiring another worker.

Question 4

How is the MPL measured

Answer 4

The change in total output as each additional worker is hired

Question 5

Does the MPL continually increase

Answer 5

No because of the law of diminishing returns the more workers hired the less the MPL increases

Question 6

What is the marginal revenue product of labour

Answer 6

The marginal revenue product of labor is change in a firms revenue as the result of hiring one more worker or the additional output of another worker times the product pric

Question 7

Are firms more interested in the MPL or the MRP when choosing to employ workers

Answer 7

The MRP

Question 8

How do firms use the MRP when choosing to hire additional workers or not

Answer 8

To decide how many workers to hire the firm must compare the additional revenue it earns from hiring another worker to the increase in cost in paying wages

Question 9

For how long should firms continue to hire workers

Answer 9

As long as the MRP is greater then the wage additional workers should be hired until the MRP equals wage cost

Question 10

Is the MRP curve a demand curve for labor

Answer 10

Yes it is because it tells a firm how many workers it should hire at any wage rate

Question 11

How is the market demand curve for labor determined?

Answer 11

By adding up the quantity of labor demanded by each firm at each wage

Question 12

Are there factors that shift the labor demand curve and if so how many

Answer 12

Yes 5

Question 13

Does a change in human capital (skills of workers) shift labor demand

Answer 13

Yes an increase shifts demand right

Question 14

Does a change in technology shift labor demand

Answer 14

Yes a change in technology that increases productivity shifts demand right while a change in technology that makes workers redundant shifts demand left

Question 15

Does a change in the price of a product shift labor demand

Answer 15

Yes as the MRP depends on the price of a product
Increase shifts demand right
Decrease shifts demand left

Question 16

Does a change in the quantity of other inputs shift demand for labor

Answer 16

Yes if more inputs are available more can be made so an increase shifts demand right a decrease shifts demand left

Question 17

Does the number of firms in the market shift labor demand

Answer 17

Yes more firms equals more demand while less firms equals less demand

Question 18

What are the 5 factors that shift labor demand

Answer 18

1: change in human capital
2: change in technology
3: change in price of product
4: change in quantity of other inputs
5: change of number of firms in market

Question 20

What shape is the curve for labour supply

Answer 20

The labour supply curve is upward sloping more at high wages but at very high wage levels it can be backward bending

Question 21

What explains the backward bend at very high wage levels

Answer 21

The backward bend is explained by the income effect because at high wages demand for free time a normal good increases and can afford the opportunity cost of work

Question 22

How is the market supply curve for labor determined

Answer 22

Adding up the quantity of labor supplied by each worker at each wage

Question 23

Are there factors that shift the labor supply curve and if so how many

Answer 23

Yes 3

Question 24

Does a change in population shift the labor supply curve

Answer 24

Yes an increase in population from immigration or natural birth rate will shift supply right

Question 25

Does a change in demographics shift the labor supply curve

Answer 25

Yes a change in demographics for example a higher birth rate will shift supply right will an ageing population will shift supply left

Question 26

Does having welfare available shift supply for labor

Answer 26

Yes having welfare shifts supply left

Question 27

How is equilibrium in the labor market determined

Answer 27

The same as in any other market where demand meets supply

Question 28

What happens to equilibrium after a shift in labor demand

Answer 28

If supply is unchanged and demand increases the result is an increase in wages and people employed

Question 29

What happens to equilibrium after a shift in supply

Answer 29

If demand is unchanged lower wages occur but more people are employed

Question 30

What is labor supply and demand shift

Answer 30

Whether wages rise depends on if demand shifts more then supply

Question 31

What does the equilibrium wage equal

Answer 31

The MRP

Question 32

Why are some wages higher then others

Answer 32

Some wages are higher because they have a much higher MRP then others for example cricketers against university lecturers

Question 33

What are compensating differentials and how do they explain differences in wages

Answer 33

Compensating workers for unpleasant aspects of job for example a very dangerous job commands higher wages

Question 34

Does discrimination affect wages

Answer 34

Yes economic discrimination can affect wages

Question 35

Why is discrimination still prevalent in workplaces 3 reasons

Answer 35

1: worker discrimination 2: customer discrimination 3: negative feedback loops

Question 36

What is personnel economics

Answer 36

The application of human resources issues such as how firms hire and train workers, promote workers and set wages and benefits.

Question 37

What does personnel economics analyse

Answer 37

The link between differences between jobs and differences in the way workers are paid

Question 38

Is the market for capital and natural resources different to that of labor

Answer 38

No there is a MRP for capital and also natural resources the same as labour

Question 39

What is the terms of trade

Answer 39

The ratio at which a country can trade exports for imports

Question 40

Why do countries not completely specialise

Answer 40

1: not all goods and services are traded internationally 2: production of goods involves increasing opportunity costs 3: tastes for products differ

Question 41

Where does comparative advantage come from

Answer 41

1: climate and natural resources 2: relative abundance of labor and capital 3: technology 4: external economies (Bollywood etc)

Question 42

Do economies benefit from trade

Answer 42

Yes economic surplus increases however producer surplus decreases which is why they lobby for government intervention

Question 43

What is a tariff

Answer 43

A tax imposed by government on imported goods

Question 44

What is tariff revenue equal to

Answer 44

Tariff price times the quantity of imported goods sold

Question 45

What does a tariff result in

Answer 45

An increase in price for domestic consumers a drop in consumer surplus and an increase in producer surplus

Question 46

What is a quota

Answer 46

A numerical limit on the quantity of goods that can be imported

Question 47

What is a voluntary export restraint

Answer 47

Agreements negotiated two countries that places a numerical limit on the quantity of a good that can be imported by one country from the other

Question 48

What is the effect of a quota

Answer 48

It raises domestic price above world price limiting imports similar to a tariff

Question 49

What is domestic support polices

Answer 49

To guarantee prices above market equilibrium after government intervention, governments will provide additional support buying the excess surplus of goods then selling, storing or disposing of it

Question 50

What is an example of a domestic support policy

Answer 50

Export subsidies where government exports are sold at world price and government pays producers promised domestic price

Question 51

What are other barriers to trade

Answer 51

Health and safety concerns over imported goods | National security concerns

Question 52

What is the WTO

Answer 52

The WTO enforces international trade agreements

Question 53

What is globalisation

Answer 53

Countries becoming more open to trade and foreign investment

Question 54

Why are people against globalisation

Answer 54

Ruins cultures exploits workers in low wage countries, protectionism, dumping and environmental concerns

Question 55

What are the 3 factors that shift supply for labor

Answer 55

1: increases in population 2: changing demographics 3: welfare