Study Notes
The labour market involves the interaction between the demand and supply of labour, which determines employment levels and wage rates. Factors such as the demand for the final product, availability of substitutes, and productivity affect the demand for labour, while population size, migration, and skills influence the supply.
- Demand for Labour — the number of workers firms are willing to hire at a given wage rate. Example: If a company needs more workers to produce a popular product, demand for labour increases.
- Derived Demand — labour is demanded for the goods and services it helps produce, not for itself. Example: More demand for cars increases the demand for car factory workers.
- Supply of Labour — everyone in an economy who is of working age and willing to work at different wage rates. Example: A larger population increases the supply of labour.
- Equilibrium Wage Rate — the wage rate at which the quantity of labour supplied equals the quantity demanded. Example: If more people want to work than there are jobs, wages might decrease until equilibrium is reached.
- Trade Union — an organization that protects workers' interests, often through collective bargaining. Example: A trade union might negotiate for higher wages for its members.
Exam Tips
Key Definitions to Remember
- Demand for Labour
- Derived Demand
- Supply of Labour
- Equilibrium Wage Rate
- Trade Union
Common Confusions
- Confusing derived demand with direct demand
- Misunderstanding the impact of substitutes on labour demand
Typical Exam Questions
- What factors affect the demand for labour? Demand for the final product, productivity, and availability of substitutes.
- How does migration affect the supply of labour? Migration increases the supply of labour as more people are available to work.
- What role do trade unions play in the labour market? They negotiate for better pay and conditions for workers.
What Examiners Usually Test
- Understanding of how demand and supply determine wage rates
- The impact of education and training on labour quality
- The role and influence of trade unions in the labour market