Supply of Labour

• The supply of labour

  The number of hours workers are willing and able to supply at a given wage rate.
• Wage elasticity of supply of labour

  The responsiveness of the supply of labour to a change in the wage rate of labour. Calculated using the formula: %ΔSL ÷ %ΔW.
• Economic rent

  Payment received by a factor of production over and above what would be needed to keep it in its present use
• Transfer earnings

  The minimum payment required to keep a factor of production in its present use. e.g when referring to the supply of labour, this is the minimum amount required to keep a worker in their job
• Factors affecting the supply of labour to an industry

  > Wage

  > Wages in other industries

  > Non-monetary benefits

  > Qualifications and skills needed to do the job

  > Demographics

  > Size of working population
• Factors affecting the wage elasticity of the supply of labour

  > Availability of workers

  > Skills & qualifications

  > The nature of the job

  > Labour immobility

  > Time period -more elastic in the long run
• Short run and long run supply of labour

  > In the SR the supply of labour is likely to be inelastic. This is likely to be because most if not all jobs require some form of training or qualifications so most people cannot switch jobs.

  > In the LR the supply of labour is likely to be more elastic. This can be due to more people being able to engage in training or gain the qualifications needed for higher paid work.
• Diagram to illustrate economic rent & transfer earnings

  A) Economic rent

  B) Transfer earnings

  C) wage rate

  D) quantity of labour

  E) S

  F) D