Labour is a derived demand for the product they are used to create. The demand for labour is known as the theory of MRP. The demand curve for labour (MRP) shows the relationship between the wage rate and number of workers employed.
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3.5.1 What is marginal revenue productivity (MRP)?
The addition to a firms revenue from employing an additional unit of factor of production, usually labour.
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3.5.1 What is the formula for MRP?
MRP = Marginal physically product x selling price
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3.5.1 What is marginal physical product (MPP)?
Addition to a firms output from employing an additional unit of a factor of production, usually labour.
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3.5.1 What are factors that influence the demand for labour?
Wage rate (movement along). Price of substitute factors (capital), productivity, other labour costs. How profitable the firms are. Number of firms in the market. (shifts)
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3.5.1 What are determinants of elasticity of demand?
Ease of substitution, time, elasticity of demand for the good or service, proportion of labour costs of total production.
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3.5.1 What is the formula for calculating elasticity of demand for labour?
Percentage change in quantity demanded of labour / percentage change in wage rage
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3.5.2 What is the supply of labour?
Number of workers willing and able to work at a given wage rate and a given period of time. It is influenced by monetary factors such as wage rate and non-monetary factors such as job satisfaction.
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3.5.2 What are determinants of the supply of labour?
Wage rates (movements along). Size of the working population. Non-monetary factors : trade unions, leisure. (shifts)
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3.5.2 What are determinants for the elasticity of supply of labour?
Time, length of training period, skill set, vocational element.
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3.5.2 What is the formula for the elasticity of supply of labour?
Percentage change in quantity supplied of labour / Percentage change in the wage rate
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3.5.2 What is geographical immobility?
When workers aren't able to move to different locations to find the best jobs for themselves. This may be because people don't want to move away from their family. It may be expensive to move house. This can lead to regional unemployment.
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3.5.2 What is occupational immobility?
When workers are unable to move from one occupation to another. May happen due to skills shortages or specific skills that aren't transferable. This can lead to structural unemployment.
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3.5.3 How are wages determined?
Labour supply = labour demand. In a perfectly competitive labour market each unit of labour is identical in skill and unable to influence wage rate. Workers must accept the ongoing wage rate. Individual firms - wage takers. Profit maximising - MRP=MC
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3.5.3 Wage determination in a non-competitive market
This situation occurs when either buyers have monopsony power (NHS employing nurser) or suppliers have monopoly power (trade unions).
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3.5.3 What are some current labour market issues?
Formal education. Skills,qualifications, pay gaps, wages and skills, gender, discrimination
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3.5.3 What is a minimum wage?
A wage that legally obliges workers to pay workers at a least a certain hourly rate. (Currently £8.21 for over 21's)
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3.5.3 What is a maximum wage?
Suggested in order to limit the incomes of the highest earner.
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3.5.3 What are advantages of a minimum and maximum wage?
Minimum wages can help reduce poverty. Maximum wages can prevent the richest in society from getting richer.
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3.5.3 What are disadvantages of minimum and maximum wage?
Minimum wages may lead to a surplus of workers in competitive markets. Minimum wages may not always reflect the cost of living. Maximum wages may reduce incentives and lead to some workers moving overseas - capital flight.
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Other cards in this set
Card 2
Front
3.5.1 What is marginal revenue productivity (MRP)?
Back
The addition to a firms revenue from employing an additional unit of factor of production, usually labour.
Card 3
Front
3.5.1 What is the formula for MRP?
Back
Card 4
Front
3.5.1 What is marginal physical product (MPP)?
Back
Card 5
Front
3.5.1 What are factors that influence the demand for labour?
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