1.5 The Labour Market

• What does the demand for labour refer to?

  Willingness to hire workers
• What is the marginal revenue product (MRP) of a worker?

  Additional revenue generated
• How does a higher wage rate affect the supply of labour?

  Increases it
• What are the key factors affecting the supply of labour?

  Wage rate and education
• Where does equilibrium in the labour market occur?

  Demand equals supply
• A higher marginal revenue product (MRP) increases the demand for labour
• Higher wages generally increase the supply of labour
• A higher labour force participation rate increases the supply of labour.

  True
• The demand for labour is derived from the demand for the goods and services that workers produce
• Higher wages generally increase the supply of labour
• Key market factors that shift the demand for labour include changes in marginal revenue product, worker productivity, demand for the firm's output, and prices of other factors of production
• The size of the population directly affects the demand for labour.

  False
• Minimum wage laws can reduce employment due to higher labour costs for businesses.


  True
• The demand for labour is derived from the demand for the goods and services produced by the workers
• Firms will hire workers up to the point where the MRP equals the wage
• An increase in wage rates attracts more individuals to join the workforce
• Better benefits offered by employers tend to attract more workers and increase the supply of labour.


  True
• Understanding labour market equilibrium helps businesses and policymakers predict and react to market changes.


  True
• Order the factors that shift the supply of labour from most to least direct effect:

  1️⃣ Wage rate

  2️⃣ Labour force participation rate

  3️⃣ Skills and education

  4️⃣ Size of population
• Higher output demand increases labour
• Arrange the scenarios based on their effects on wage rate and employment level:

  1️⃣ Increase in Demand

  2️⃣ Decrease in Demand

  3️⃣ Increase in Supply

  4️⃣ Decrease in Supply
• What happens to the demand for labour when worker productivity increases?

  Increases
• Equilibrium in the labour market occurs when the quantity of labour demanded equals the quantity of labour supplied.


  True
• The supply of labour is influenced by the wage rate and the size of the population.

  True
• Order the factors affecting the demand for labour:

  1️⃣ Marginal Revenue Product (MRP)

  2️⃣ Worker Productivity

  3️⃣ Demand for the Firm's Output

  4️⃣ Prices of Other Factors of Production
• Match the factor affecting labour supply with its effect:

  Wage Rate ↔️ Higher wages increase supply

  Size of Population ↔️ Larger population increases supply

  Labour Force Participation Rate ↔️ Higher rate increases supply
• Equilibrium in the labour market occurs when the quantity of labour demanded equals the quantity supplied.

  True
• A higher marginal revenue product increases the demand for labour.


  True
• Worker productivity is a key factor affecting the supply of labour.

  False
• Match the effect of minimum wage laws with its impact:

  Higher Wages ↔️ Increases income for low-skilled workers

  Reduced Employment ↔️ Decreases job opportunities

  Inflation ↔️ Increases prices of goods and services
• Trade unions represent workers in negotiations with employers
• A higher marginal revenue product (MRP) increases the demand for labour.

  True
• The supply of labour refers to the total number of hours workers are willing and able to offer at different wage rates.


  True
• A larger population leads to a higher potential labour supply.

  True
• Match the scenario with its effect on wage rate and employment level:

  Increase in demand ↔️ Wage rate increases, employment level increases

  Increase in supply ↔️ Wage rate decreases, employment level increases

  Decrease in demand ↔️ Wage rate decreases, employment level decreases

  Decrease in supply ↔️ Wage rate increases, employment level decreases
• Higher prices of substitutes for labour, such as capital, increase labour demand.


  True
• A larger population increases the potential supply of labour
• What happens to the wage rate and employment level when there is an increase in labour demand?

  Both increase
• The supply of labour refers to the total number of hours workers are willing and able to offer at different wage rates.


  True
• What happens to the equilibrium wage rate when the supply of labour increases?

  Decreases