Demand and supply of labour (Unit 1)

1) Labour demand is the quantity of hours demanded by firms.

2) wages fall = labour becomes cheap = firms costs fall = produce more goods = more            labour required

3) Labour supply is the quantity of working hours supplied by workers

4) wages rise = larger supply of labour

5) Labour slopes upwards

  This is because the substitution effect (workers incentivised to work more to earn more     income) is greater than the income effect (as wages rise, workers can earn the same         income  as before by working less, so workers work less to enjoy more leisure)

6) wages too low = less labour supply = more labour demand = excess demand

…