The Labour Market
Overview
Behind every product on a shelf sits a market you rarely think about directly: the market for the people who made it. Businesses do not just buy raw materials and machinery, they buy labour, and like any other market, the labour market has its own demand, its own supply, and its own price, the wage rate.
In this lesson you will apply the demand and supply model you already know for goods to the market for workers, learn what makes the demand for labour rise or fall, what makes people willing to supply their labour, and how trade unions and government policy can push wages away from the level demand and supply alone would set. You will practise reading and describing labour market diagrams precisely, since this is exactly the skill Edexcel tests here.
Objectives
- Factors affecting the demand for labour: demand for the final product (derived demand), availability of substitutes including machines, productivity of workforce
- Factors affecting the supply of labour: population size, migration, age distribution of population, retirement age, school-leaving age, female participation, skills and qualifications, ability to move geographic locations or move to different types of employment
- Importance of the quantity and quality of labour to business
- Impact of education and training on human capital and quality of labour
- The use of labour market diagrams showing supply of labour, demand for labour, market equilibrium wage and quantity of labour (employment), and effect of shifts in demand for labour and supply of labour
- Trade union involvement in the labour market: impact of trade union activity to improve working conditions and increase wages
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Flashcards
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Lesson Note
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Lesson Evaluation
Congratulations on completing the lesson on The Labour Market. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.
You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.
Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.
- The demand for labour is described as a 'derived demand' because: A) It depends only on the wage rate B) It exists because of demand for the final product labour produces C) It is set entirely by government D) It never changes over time Answer: B
- Which of the following would shift the supply of labour curve to the right? A) A fall in the school-leaving age B) An increase in net migration into the country C) A rise in the retirement age being lowered D) A fall in female participation in the workforce Answer: B
- On a labour market diagram, the vertical axis shows: A) Quantity of labour B) The wage rate C) Total output D) The price of the final product Answer: B
- A trade union negotiates a wage above the market equilibrium. According to the basic labour market model, this is most likely to cause: A) A shortage of labour B) A surplus of labour (unemployment) C) No change in employment D) A fall in the wage rate Answer: B
- Which of the following is most likely to increase the demand for labour in a factory? A) A fall in consumer demand for the factory's product B) A rise in the cost of the machinery that substitutes for workers C) A fall in worker productivity D) An increase in the school-leaving age Answer: B
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Recommended Books
Further learning from open sources
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Textbook section
Demand and Supply at Work in Labor Markets
Predict shifts in the demand and supply curves of the labor market
"Principles of Economics 2e: Demand and Supply at Work in Labor Markets" by OpenStax, OpenStax, Rice University, licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). Source: https://openstax.org/books/principles-economics-2e/pages/4-1-demand-and-supply-at-work-in-labor-markets. Access for free at https://openstax.org/books/principles-economics-2e/pages/1-introduction
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Textbook section
Market Power on the Supply Side of Labor Markets: Unions
Explain the concept of labor unions, including membership levels and wages
"Principles of Economics 2e: Market Power on the Supply Side of Labor Markets: Unions" by OpenStax, OpenStax, Rice University, licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). Source: https://openstax.org/books/principles-economics-2e/pages/14-3-market-power-on-the-supply-side-of-labor-markets-unions. Access for free at https://openstax.org/books/principles-economics-2e/pages/1-introduction
Published by other organisations under open licences, credited as they ask. Links open their websites.
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