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Questions and Answers
What is the real wage if the money wage is $10 per hour and the price index is 2.0?
What is the real wage if the money wage is $10 per hour and the price index is 2.0?
What is the shape of the aggregate labour demand curve?
What is the shape of the aggregate labour demand curve?
What happens to the labour supply curve when the real wage increases?
What happens to the labour supply curve when the real wage increases?
What is the marginal product of labour (MPL) when 4 workers are employed?
What is the marginal product of labour (MPL) when 4 workers are employed?
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What is the effect of an increase in the price index on the labour demand curve?
What is the effect of an increase in the price index on the labour demand curve?
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What is the labour supply curve sloping upward indicating?
What is the labour supply curve sloping upward indicating?
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What is the aggregate labour demand curve a function of?
What is the aggregate labour demand curve a function of?
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What is the effect of an increase in the marginal productivity of labour on the labour demand curve?
What is the effect of an increase in the marginal productivity of labour on the labour demand curve?
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What is the real wage in the economy if the money wage is $10 per hour and the price index is 2.0?
What is the real wage in the economy if the money wage is $10 per hour and the price index is 2.0?
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If the aggregate price level increases, what happens to the aggregate labour demand curve?
If the aggregate price level increases, what happens to the aggregate labour demand curve?
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What is the relationship between the marginal productivity of labour and the real wage?
What is the relationship between the marginal productivity of labour and the real wage?
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How does an increase in the price index affect the labour demand?
How does an increase in the price index affect the labour demand?
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What is the condition for a firm to be in equilibrium in the labour market?
What is the condition for a firm to be in equilibrium in the labour market?
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What happens to the labour demand curve when the money wage increases?
What happens to the labour demand curve when the money wage increases?
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What is the effect of an increase in the aggregate money wage on the aggregate labour demand?
What is the effect of an increase in the aggregate money wage on the aggregate labour demand?
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What is the primary factor that influences the size of the working-age population?
What is the primary factor that influences the size of the working-age population?
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What is the result of a higher participation rate in the labour market?
What is the result of a higher participation rate in the labour market?
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What is the effect of higher productivity on the real wage and employment?
What is the effect of higher productivity on the real wage and employment?
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What is the role of unions in the competitive labour market?
What is the role of unions in the competitive labour market?
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What is the effect of a price index on the labour demand curve?
What is the effect of a price index on the labour demand curve?
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What is the result of a minimum wage law in the labour market?
What is the result of a minimum wage law in the labour market?
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What is the primary factor that determines the labour demand curve?
What is the primary factor that determines the labour demand curve?
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What is the relationship between the labour demand and supply curves in the competitive labour market?
What is the relationship between the labour demand and supply curves in the competitive labour market?
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Study Notes
Labour Demand Curve
- The labour demand curve is a downward sloping curve that shows the relationship between the real wage (W/P) and the number of workers demanded
- The curve is downward sloping because as the real wage increases, the quantity of labour demanded decreases
- The curve is also known as the MPL (Marginal Product of Labour) curve
Labour Supply Curve
- The labour supply curve is an upward sloping curve that shows the relationship between the real wage (W/P) and the number of workers supplied
- The curve is upward sloping because as the real wage increases, the quantity of labour supplied also increases
- Labour supply is generally assumed to be an increasing function of the real wage (W/P)
Shifts in Labour Demand Curve
- An increase in the relative price of the firm's output (p) shifts the labour demand curve to the left
- An increase in the marginal productivity of labour (MPL) shifts the labour demand curve to the right
Aggregate Labour Market
- The aggregate labour market combines the labour demand and supply curves to determine the equilibrium real wage and employment level
- The aggregate labour demand curve is downward sloping, while the aggregate labour supply curve is upward sloping
- The equilibrium real wage and employment level are determined where the two curves intersect
Factors that Shift Labour Supply Curve
- The size of the working-age population (influenced by birth rate, retirement ages, immigration rates) shifts the labour supply curve
- The participation rate (percentage of working-age population seeking employment) also shifts the labour supply curve
Frictions in Competitive Model
- Involuntary unemployment arises when the unemployed would be willing to accept a job at the current market wage but are not able to find employment
- Factors that increase the real wage above the competitive equilibrium, such as minimum wage laws, unions, and taxes, can lead to involuntary unemployment
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Description
This quiz is based on the concept of Aggregate Labour Demand Curve, which is a fundamental concept in economics. It deals with the relationship between the labour demand and wage rate. The quiz is based on a table that shows the labour demand and wage rate at different levels of employment.
