6.2

• Market supply of labour definition

  The number of workers willing and able to work in a specific job or industry at a given wage rate
• what is the key factor influencing the supply of labour to a specific occupation?

  wage rate elasticity- higher wages tend to attract more workers, increasing supply
• how do non-monetary factors influence labour supply?

  factors like job satisfaction, working conditions, job security, location, and status can make an occupation more or less attractive
• how does required qualification and training affect labour supply?

  jobs requiring extensive training or high qualifications often have a more inelastic labour supply due to time and cost barriers
• how does mobility of labour influence supply?

  geographical mobility and occupational mobility impact how easily workers can enter different markets
• what role does immigration play in labour supply?

  immigration can increase the labour supply, especially in sectors with skill shortages or low-wage roles
• how can income tax and benefits affect labour supply?

  high taxes or generous benefits can reduce incentives to work, decreasing labour supply in certain markers
• what is the backward-bending supply curve of labour?

  at low wages, higher pay increases supply. at very high wages, workers may choose more leisure, reducing hours worked, bending the curve backward
• how can trade unions affect labour supply?

  can restrict labour supply (e.g by requiring memberships or qualifications) or encourage it through wage negotiations and job protections
• What causes a shift in the supply of labour?

  • wage rate - proportional relationship between how much worker paid and number of workers willing to work
  • Changes in population - rise in population means increase in supply of labour
  • advantages of work - if benefits of working are high (e.g holiday entitlements and promotion opportunities) supply of labour likely to increase
  • trade unions
  • Taxes and benefits
  • Training - if lots of training or high qualifications required, supply of labour may fall
• elasticity of supply of labour definition

  proportionate change in the supple of labour following a change in the wage rate
• what is the equation for elasticity of supply of labour?

  percentage change in the quantity of labour supplied / percentage change in the wage rate
• factors that determine elasticity of supply of labour?

  • skill levels of workers
  • mobility of workers
  • long and short run - more elastic in the long run as people have time to respond to wage changes
  • level on unemployment
• When worker enjoys their job, the net advantage of the work is greater than the welfare gains from the wage - workers willing to work for lower money wage
• if work is unpleasant, the supply of labour reflects the fact that the hourly rate must be high enough to compensate for the nature of the job
• when is personal welfare maximised?

  Utility of welfare from last unit of money earned = utility of welfare from the last unit of leisure time sacrificed