8418004
Description
Flashcards by Sophie Knight, updated more than 1 year ago
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Created by Sophie Knight
about 7 years ago
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| Question | Answer |
| What is the concept of derived demand? | The idea that the demand for all factors of production is derived from the demand for the products produced by them |
| Name 4 things that would result in a leftward shift in the demand curve for labour | 1) A fall in cost of capital 2) Decrease in demand for the product 3) Increased investment abroad 4) New technology |
| Give 4 examples of things that would cause a rightward shift of the supply curve for labour | 1) Rise in retirement age 2) A fall in income tax 3) Fall in unemployment benefits 4) Child care subsidies |
| What are the 4 factors that determine the wage elasticity of demand? | 1) Labour costs as a proportion of total costs 2) Ease of substituting labour for capital 3) PED of product produced 4) Time period |
| What are the 4 factors that determine the wage elasticity of supply? | 1) How skilled the job is 2) How easy it is for someone to enter the labour market 3) Occupational and geographical mobility of labour 4) Time period |
| What is marginal revenue product? | The addition to total revenue from the last worker employed. -Due to diminishing returns each worker will add less to revenue than the previous one, eventually the revenue added will be the same as the wage rate, at which point no more workers will be hired. |
| What are the 6 assumptions of MRP theory? | 1) Workers are homogenous 2) Firms have no buying power when demanding labour 3) There are no trade unions 4) Productivity of each worker can be easily measured 5) Supply is perfectly elastic 6) The product is sold in a perfectly competitive market |
| What are the 3 main evaluative points of marginal revenue product theory? | 1) In many cases it is hard to measure labour productivity as there is no physical output 2) Sometimes wages are set with no consideration of demand for labour (public sector) 3) Useful for demand side but information on supply side would also be needed to evaluate wage differentials |
| What 4. things could cause a rightward shift in the MRP curve? | 1) A rise in the selling price of the product, increasing the value of the output of each worker 2) An increase in the price of capital 3) Increase in productivity of workers 4) Government wage subsidies |
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What are 4 assumptions of a perfectly competitive labour market?
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1) Freedom of entry to the labour market 2) Perfect knowledge about available jobs and working conditions 3) Firms are "wage takers" and have to pay the going market wage rate 4) Labour is homogeneous |
| What are the characteristics of a diagram showing a perfectly competitive labour market? | The supply curve is horizontal and the quantity employed will be decided where MRP = supply |
| What are the 3 main types of imperfectly competitive labour markets? | 1) A firm is a dominant or monopoly buyer of labour and there are many workers 2) The firms is faced with a monopoly supplier of labour - often a trade union 3) There is a monopoly seller AND a monopoly buyer of labour (Bilateral monopoly) |
| How is a trade union defined? | "An organised association of workers in a trade or profession which is formed to promote the interests of workers" |
| What effect is a trade union likely to have on wages and quantity employed of labour? | It causes a 'kink' in the supply curve for labour - acting like a minimum price would Raises the wage but leads to an excess in supply which leads to unemployment |
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What 4 things would effect the power of a trade union?
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1) Trade union membership (percentage of people in the profession in the union) 2) Militancy - likelihood to call for industrial action 3) Demand elasticity - the more inelastic, the more power 4) Profitability of employer, the more money the employer is making, the more scope there is for negotiations |
| What are 2 causes of the occupational immobility of labour? | 1) Very specific skill set 2) Generally low skilled with a lack of qualifications |
| What are 4 causes of the geographical immobility of labour? | 1) Family ties 2) Housing too expensive in other areas 3) Poor infrastructure 4) Language and cultural barriers |
| What market failure is the government trying to correct by implementing a minimum wage? | Relative poverty and inequality |
| The extent that a minimum wage leads to unemployment depends critically on what 3 factors? | 1) The difference between the current market equilibrium wage and the new minimum wage 2) The relative elasticities of the demand and supply for labour 3) The effect on an individual market will differ from that of the whole economy |
| Name 4 advantages of a minimum wage | 1) Reduces inequality 2) Could potentially raise income tax revenue 3) Prevents worker exploitation 4) Encourages firms to invest in improving the productivity of workers |
| Name 4 disadvantages of a minimum wage | 1) Unemployment is likely to rise 2) Workload on current workers is likely to increase due to fewer workers 3) Could increase geographical inequality 4) Firms could have to raise prices, causing inflation and decreasing competitiveness |
| What are 3 reasons for the implementation of a maximum wage? | 1) An attempt to control inflation 2) To try and reduce inequality 3) Setting maximum wages for public sector workers in an effort to reduce public sector spending |
| Name 2 advantages of a maximum wage | 1) Reduces inequality and the wage gap 2) More company profits will go to lower level workers and shareholders instead of CEO's |
| Name 4 disadvantages of a maximum wage | 1) Politically unpopular 2) Could cause a brain drain 3) Can find loopholes through giving out bonuses to make up the wage difference 4) Less incentive to work in stressful high powered jobs |
| What is the true shape of the supply of labour curve and why? | Backwards bending At high levels of income the worker will prefer to work shorter hours rather than receive the extra income it could have earned |
| What is the theory of substitution in terms of the labour supply market? | A worker with a pay rise of 10% can now buy 10% more goods and due to the opportunity cost of not being at work is now greater they will choose to substitute leisure for work if the rate of pay increases |
| What is the theory of income in terms of the labour supply market? | Because work is an inferior good, the higher the income, the fewer hours individuals will wish to work |
| What are 3 non-monetary factors that effect the supply of labour? | 1) Job satisfaction 2) Location 3) Commuting |
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