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What is meant by a derived demand?
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What is meant by a derived demand?
A derived demand is when the demand for labour depends on the demand for goods/services produced by that labour.
What is the marginal revenue product (MRP) of labour?
The marginal revenue product (MRP) of labour is the additional revenue generated by employing one more unit of labour.
True or False?
An increase in the price of a product always decreases demand for labour.
False.
An increase in the price of a product usually increases the demand for labour as it increases the marginal revenue product (MRP).
State a factor that influences demand for labour during economic booms.
During economic booms increased demand for goods and services leads to increased demand for labour.
What is the impact of capital substitution on labour demand?
Capital substitution potentially reduces labour demand as machinery becomes more cost-effective than human labour.
What is the relationship between labour productivity and labour demand?
The relationship between labour productivity and labour demand is positive. When the output of each employee increases over time, firms are likely to demand more labour.
What is a labour market?
A labour market is the interaction between the demand for labour and the supply of labour. This is between the buyers of labour (firms) and the sellers of labour (households).
Which factor increases the demand for labour by reducing average costs (AC)?
Higher labour productivity increases the demand for labour by reducing average costs (AC). Higher productivity lowers average costs (AC) because the output per worker over time rises.
True or False?
The demand for labour is independent of the final product demand.
False.
The demand for labour is derived from the demand for the final product it produces.
Who are the buyers of labour?
The buyers of labour are firms that demand and employ workers.
How does an economic recession affect the demand for labour?
An economic recession typically reduces the demand for labour due to a lower demand for goods and services.
Who are the sellers of labour?
The sellers of labour are households or individuals that supply their labour to the market as employees.
What does geographical labour immobility mean?
Geographical labour immobility occurs when workers find it difficult to move from one region in a country to another in order to secure employment.
What is meant by occupational mobility of labour?
Occupational mobility of labour refers to the ability of workers to switch employment to another trade or profession when they lose their job.
How do income tax rates affect the labour supply?
Income tax rates affect the labour supply by either creating incentives or disincentives to work. Reducing the rate of income tax could encourage more individuals to supply more hours to the labour market.
How do immigration laws affect the supply of labour in a country?
Restricting immigration can potentially reduce the supply of labour available from other countries.
True or False?
Higher welfare benefits always increase labour supply.
False.
Higher welfare benefits typically decrease labour supply by reducing the incentive to work. This is especially the case for low-skilled labour.
How do social trends impact labour supply?
Social trends impact labour supply by influencing people's choices about work. Individual preferences for working from home will affect which occupations and employers they will supply themselves to.
What is a possible effect of trade union power on the labour supply in an industry?
A possible effect of trade union power on the labour supply in an industry is often to increase it. Workers find the protection of trade union membership beneficial.
What does market failure mean in labour markets?
Market failure in labour markets occurs when workers are unable to move easily between jobs due to geographical or occupational immobility.
In what way does the comparative wage rate affect the labour supply?
The comparative wage rate in other occupations influences the labour supply by affecting workers' choices between different jobs.
How do working conditions affect the labour supply?
Working conditions impact the labour supply by acting as an incentive or disincentive for workers to offer their labour in certain industries.
True or False?
Longer training periods increase the supply of labour to an industry.
False.
Longer training periods typically decrease the supply of labour to an industry by acting as a barrier to entry.
How do non-pay benefits affect the labour supply?
Non-pay benefits affect the labour supply by acting as incentives for workers to offer their labour in some industries or companies over others.
What is labour market equilibrium?
Labour market equilibrium is the point where the demand for labour equals the supply of labour. This is where the demand curve crosses the supply curve.
What is a national minimum wage (NMW)?
A national minimum wage (NMW) is a legally imposed wage floor that employers must not pay below. To be effective it must be set above the labour market equilibrium.
What is meant by public sector wage setting?
Public sector wage setting is when the government as the largest employer influences the setting of wage rates for public sector workers.
How does a maximum wage affect the labour market?
A maximum wage affects the labour market by imposing a wage ceiling below the labour market equilibrium. This can lead to labour shortages as workers are not willing to work for a low wage.
True or False?
The UK government is the largest employer in the UK.
True.
The UK government is the largest employer in the UK.
What is meant by the wage elasticity of demand for labour?
The wage elasticity of demand for labour measures the percentage change in a firm's demand for labour in response to the percentage change in the wage rate.
Define the wage elasticity of supply of labour.
The wage elasticity of supply of labour measures the percentage change in the supply of labour to a firm in response to the percentage change in the wage rate.
How do labour costs affect the wage elasticity of demand for labour?
Higher labour costs as a proportion of total costs will increase the wage elasticity of demand for labour. Demand will be more wage elastic.
How is the wage elasticity of demand impacted by the ease of capital substitution?
The ease of capital substitution affects wage elasticity of demand by making the demand for labour more wage elastic. If capital can easily replace labour then employers' demand for labour is more responsive to rising wage rates.
How does the wage elasticity of demand change over time?
Over time the wage elasticity of demand becomes more wage elastic as firms can adjust their production methods.
True or False?
Low-skilled occupations typically have a wage inelastic supply of labour.
False.
Low-skilled occupations typically have a wage elastic supply of labour. Supply is highly responsive to a change in wage rates.
How do qualifications and training requirements affect the wage elasticity of labour supply?
Qualifications and training requirements affect the wage elasticity of labour supply by making it more wage inelastic. The supply of labour to occupations requiring higher levels of training will be less responsive to a change in wage rates in the short term.