Notesale: Turn your study into money

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The Labour Market: Demand and Supply
Demand for labour is a derived demand by this I mean firms are doing the demanding
and the consumer is doing the supplying, firms are demanding labour as a consequence
for consumer demand for their goods and services
...
If
the economy is growing and firms are confident that it will continue to grow in the
future, employment levels will tend to increase
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Marginal Productivity theory - The theory states that demand for workers depends on
their marginal revenue product (MRP)
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With perfect competition in the product market, the firm becomes a price taker,
implying the price of its output does not change if it sells more, so marginal revenue will

be equal to price, and the firm can sell all its output at the ruling market price
...


Shifts in the demand curve for labour
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This will come about if the
marginal product of labour/ marginal revenue increases

The elasticity of demand for labour - is a measure of the responsiveness of the quantity
demanded of labour to changes in the wage rate
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In the short run, firms
may not have enough time to reorganise their operations and will thus have to employ
the same number of workers if wage rates increase due to contracts etc
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Elasticity of demand for the product ~ labour
is a derived demand so collapse in demand for product = collapse in demand for labour
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The supply of labour
The labour supply consists of those who are economically active
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The supply of labour in a particular occupation is influenced by monetary and non
-monetary factors
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The higher the wage rate the more people want the job
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If people can choose more
may be attracted to the given occupation
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Promotion, job security, Working conditions, holiday all other factors
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Supply of labour to a particular firm - Availability of training, location, unemployment
rate, opportunities for overtime
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Sense of vocation ~ The
rewards are not wholly financial and so changes in wage may not affect such as doctors
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Due to notice
periods and training periods

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