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39 Cards in this Set
- Front
- Back
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Labour Demand |
The amount of labour that firms are willing and able to employ at a given wage rate |
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Derived Demand |
Businesses demand labour as they can use it to create products |
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Marginal productivity theory |
The extra productivity gained by employing one additional unit of labour |
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Factors influencing WED |
PED of final product Proportion of costs spent on labour Ease of factor substitution Time frame |
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Total physical product |
Number of goods firm is able to produce and different labour levels |
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Marginal physical product |
Shows the impact of adding one more worker |
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Marginal revenue product |
Shows the financial benefit of adding one more worker |
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When will firms hire workers? |
When the wage rate is less than the MRP the firm will make a profit |
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Labour supply |
The amount of Labour workers are willing to offer at a given wage rate |
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What causes the labour supply curve to shift |
Non monetary factors - changing working conditions - changing non-monetary benefits - changing wage in substitute - changing barriers to entry - changing population |
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What does wage elasticity of supply depend? |
Skill levels required The amount of training Time frame |
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Transfer earnings |
Wage required to prevent worker from quitting job |
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Economic rent |
Paying wages above necessary to encourage worker |
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Monopsony |
A market with one dominant buyer and many sellers |
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Examples of monopsony |
Police NHS Civil servant |
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Problems of monopsonies |
Depresses wages below MRP Allows firms to make more profit Few options for workers Lower working conditions |
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What is a trade union |
An organisation that protects the rights and pay of workers Through collective bargaining |
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Trade union examples |
Unite ATL (teachers) PFA (footballers) |
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Effect of trade unions increasing wages |
Raise in wages Contraction in demand Excess supply More unemployment |
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Monopsony market with Union |
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Arguments for trade unions |
Employment protected / increased People more productive higher wage Multiplier effect |
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Arguments against trade unions |
Real wage unemployment Profit and employment reduce Loss of flexibility Cost push inflation |
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What does impact depend on? Trade unions |
Wage elasticity of demand More inelastic equals less unemployment |
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What is wage discrimination? |
Films with market power pay individual wages
Means that wages can be below equilibrium point Removal of economic rent |
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Reasons for gender discrimination |
1. Concentration in low-wage industries 2. Part-time 3. Parenting responsibilities 4. Discrimination |
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Race discrimination |
Where more people of a particular race are employed Or paid less or more |
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Other types of wage discrimination |
Age Disability Religion Sexuality |
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What happens with wage discrimination |
Reduction in supply Reduction in demand Subsequent change in wage rate Less labour |
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Minimum wage |
The minimum wage level that applies by law are required to pay |
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What does the minimum wage depend on |
Coverage (universal age experience) Government or panel set Method of updating Hourly or monthly rate |
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What is the Big Mac index |
Index that shows number of big Macs that one can purchase with one hour of work on minimum wage |
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Argument for minimum wage Keynes |
Higher wages More disposable income More consumption (high MPC) Increase output |
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Efficiency wage argument |
Higher wages Walker activity More encouragement to work Increased output |
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Inequality argument |
Raises income of low income household Reduces absolute poverty Reduces relative poverty |
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Minimum wage on perfectly competitive market Minimum wage on monopsony |
Increase in minimum wage Unemployment in perfectly competitive Increased employment in Monopsony |
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Arguments against minimum wage |
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What will minimum wage impact depend on |
Level of increase Elasticity of curves Economic growth Productivity increase |
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What is the national living wage |
Wage determined by government as minimum needed to live |
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Problem with national living wage |
Same rate for all of UK Cause unemployment in low-wage sectors Encourage firms to invest capital Not for under 25s |
