demand for labour

• What type of market is the labour market classified as?

  Factor market
• Who determines the supply of labour?

  Employees who want to be employed
• What is meant by derived demand in the context of labour?

  Demand for labour comes from demand for products
• If there is no demand for cars, what happens to the demand for car manufacturers?

  There will be no demand for car manufacturers
• What factors relate to the demand for labour?

  Productivity and product demand
• How is the elasticity of demand for labour linked to product demand?

  It is linked to price elasticity of the product
• What effect does a higher wage rate have on the demand for labour?

  It leads to movements along the curves
• What are nominal wages?

  Monetary value of wages
• How are real wages calculated?

  Nominal wages adjusted for inflation
• What factors affect the demand for labour?

  • Wage rate
  • Demand for products
  • Productivity of labour
  • Availability of substitutes for labour
  • Profitability of the firm
  • Number of firms in the market
• What does the downward sloping demand curve indicate about wages and employment?

  Higher wages lead to fewer workers employed
• What might firms consider if wages increase?

  Switching production to cheaper capital
• How does the demand for products influence the demand for labour?

  Higher product demand increases labour demand
• What can increase the productivity of labour?

  Education, training, and technology
• What happens to the demand for labour if substitutes for labour are available?

  Demand for labour will fall
• How does a firm's profitability affect its demand for labour?

  Higher profits allow for more labour employment
• How does the number of firms in the market affect labour demand?

  More firms increase demand for labour
• What is the impact of lower demand for labour on wages?

  It can lead to lower wages
• What determines the elasticity of demand for labour?

  • Proportion of labour costs to total costs
  • Ease of substituting factors of production
  • Price elasticity of demand for the product
• What does inelastic demand for labour imply about substitutes?

  There are few or no substitutes available
• What happens to wages when there is inelastic demand for labour and lower supply?

  Wage rates increase significantly
• How is productivity calculated?

  Output per worker per time period
• What can increase productivity?

  Training workers and advanced machinery
• What is unit labour cost?

  Labour cost per unit of output
• How do lower relative unit labour costs affect competitiveness?

  They increase competitiveness in manufacturing
• What can allow higher prices to compete in the market?

  Niche market targeting or product differentiation
• How does productivity affect unit labour costs?

  Higher productivity lowers unit labour costs
• What are the substitution and income effects on labour supply?

  • Substitution effect: Higher wages lead to more leisure time
  • Income effect: Higher incomes increase demand for leisure
• What does the backward bending labour supply curve indicate?

  Higher wages lead to fewer hours worked
• Why do people choose more leisure time as incomes rise?

  Leisure is seen as a normal good
• What happens when the wage rate exceeds a certain amount?

  People choose more leisure over work