(a) What is unemployment? (b) Explain any three types of unemployment

Answer Details

a. Meaning of unemployment. Unemployment is a situation in which people who are willing and able to work at the prevailing wage rate are unable to find suitable jobs.

b. Three types of unemployment.

• Frictional unemployment: the short-term unemployment that occurs when workers are between jobs, for example when they have left one job and are searching for another.
• Structural unemployment: unemployment caused by a change in the structure of the economy or of demand, so that workers' skills no longer match the jobs available (for example, when a product goes out of use or a new technology replaces old skills).
• Cyclical (demand-deficient) unemployment: unemployment that arises during a general fall in economic activity or depression, when total demand for goods and services is low, so firms cut output and lay off workers.

(Other types include seasonal and disguised unemployment.)