economics

• Labour market


  Where workers sell their labour and employers buy the labour: it consists of the household's supply of labour and firms' demand for labour
• What arewages? (3)wages? (3)- Theprice of labour, allocated by the interaction ofsupply and demand-Incomesto householdsandcosts to firms- It is heavily influenced bygovernment and trade union intervention
• What is a

  salary?Ayearlywage divided equally into 12 (monthly) parts
• What is

  pay?Wage rate or salary - the amount of money workers earn
• What is a

  trade union?An organisation of workers that is active on behalf of its members to increase wages, salaries, and improve working considitions
• What is the

  role of the labour market? (2)- to enable workers who are willing and able to sell their labour to meet employers who are willing and able to offer them a job- todetermine the wage rateor salary for this work
• What are the

  3 types of labour markets?-Local, within short commuting distance-National, whole UK-International, whole world or large section (e.g. EU)
• What do labour markets consist of? (3)

  Smaller, interacting labour markets for different:-Qualifications-Skills-Geographicallocations
• What

  informationis exchanged between employers and workers in a labour market?- Wage rates

  - Working conditions

  - Level of competition

  - Job location
• What is the

  perfect mobilityof labour?Workers canfreelymove between one job and another
• Why does the operation of the labour market

  lackperfect mobility?- Different jobs requiredifferent skills- Workers areunwilling to relocate- Workers often havepersonal tiesto jobs or locations- Workers may lack the information about jobs available due toinformation failure
• When does the labour market act more like a

  free market?- When there islow unemployment- When theeconomy is doing well
• What is the

  interaction of workers and employers?- Workersestablish wages, working conditions, etcwith their employers- This may be donedirectly by workers- This is often doneindirectly by trade unions through collective bargaining
• What is

  collective bargaining?The process of negotiating wages, working conditions, etc for union members between trade unions and employers
• What are wages mainly determined by?

  The interaction of supply and demand
• What is the

  equilibrium wage?The wage where Supply = Demand
• What type of demand is labour?

  Derived demandfor the product that labour helps to produce
• Supply of labour


  The total number of people who are willing and eligible to supply their labour, including the unemployed
• What

  2 types of labour supplyare there?Activeandinactivelabour supply
• What is the difference between

  active and inactive labour?Activelabour supply iscurrently working/looking for work, while aninactivelabour supply isnot
• What are examples of

  activelabour supply?- Employees

  - Self employed

  - Unpaid workers

  - Unemployed
• What are examples of

  inactivelabour supply?- Looking after family

  - Short-term sick

  - Long-term sick

  - Discouraged workers

  - Students

  - Retired
• What factors affect

  demandfor labour?- Thestate of the economy: better economy, greater demand-Increased demand in particular markets-Wage rates and Real wages: lower wage rates, greater demand-Productivity of labour: greater productivity means labour more cost efficient-Profitability of firms: more profit, more labour afforded
• What factors affect

  supplyof labour?-Wage rate, higher wages: more supply-Other money payment opportunities(e.g. bonuses) increase supply-Size of working population: larger population, more supply-Better standard of non-monetary factorsincrease supply-Less barriers to entry, more supply-Education and trainingincreases supply of skilled workers
• How do supply and demand curves of labour work?

  The exact same as the supply and demand curves of goods and services
• What does an

  increasein laboursupplymean?Supplycurveshifts to the right,decreasingwages, butincreasingquantitysupplied
• What does an

  increasein labourdemandmean?Demandcurveshifts to the right,increasing wagesandquantity demanded
• What does the change in quantity supplied/demanded depend on?

  PEDandPESof labour
• What jobs earn the

  mostmoney?Jobs where thedemand for labour is high, butsupply is low and inelastic(e.g. CEOs)
• What jobs earn the

  leastmoney?Jobs where thedemand for labour is low and elastic, whilesupply is high and elastic(e.g. fast food workers)
• What is the

  idealelasticity for workers?Perfectly inelastic supply(e.g. when one has a unique skill like Messi), so wages depend entirely on demand
• What is the minimum wage?

  TheNational Minimum Wageallocates a lower boundary of what firms must pay their workers
• What is the National Living Wage?

  Minimum wage for over 25-year-olds
• Gross pay


  The amount of money than an employee earns before any deductions are made
• Net pay


  The amount of money that an employee is left with after deductions are made from the gross income
• What

  deductionsare taken from gross pay to make net pay?- Income tax

  - National Insurance

  - Pension contributions

  - Repayment of student loan
• Income tax


  A tax levied directly on personal income, i.e. a tax on a person's wages
• National insurance


  A contribution paid by workers, and their employers, towards the cost of state benefits
• What are

  pension contributions?The money that a worker pays into a workplace pension scheme, to which the employer also contributes
• How is

  gross paycalculated?Base pay + Any extra payments