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Questions and Answers
What does the vertical axis represent in the labour market graph?
What does the vertical axis represent in the labour market graph?
The vertical axis represents the price of one hour of labour.
What does the horizontal axis represent in the labour market graph?
What does the horizontal axis represent in the labour market graph?
The horizontal axis represents the quantity of hours of work bought and sold in the market.
Whose decisions determine the labour supply curve?
Whose decisions determine the labour supply curve?
The decisions of workers determine the labour supply curve.
Whose decisions determine the labour demand curve?
Whose decisions determine the labour demand curve?
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What is the equilibrium wage?
What is the equilibrium wage?
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In a competitive labour market, employers are wage-setters.
In a competitive labour market, employers are wage-setters.
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What is the marginal product of labour?
What is the marginal product of labour?
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What is the marginal revenue product of labour?
What is the marginal revenue product of labour?
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According to the Rational Rule for Employers, when should employers hire additional units of labour?
According to the Rational Rule for Employers, when should employers hire additional units of labour?
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Why is the labour demand curve downward sloping?
Why is the labour demand curve downward sloping?
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The demand for labour is derived demand.
The demand for labour is derived demand.
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A decrease in the price of capital can have what two effects on labour demand?
A decrease in the price of capital can have what two effects on labour demand?
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What is the difference between complements and substitutes?
What is the difference between complements and substitutes?
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An increase in labour productivity will lead to a decrease in labour demand.
An increase in labour productivity will lead to a decrease in labour demand.
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An increase in nonwage costs of labour will lead to a decrease in labour demand.
An increase in nonwage costs of labour will lead to a decrease in labour demand.
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What is the opportunity cost of an hour of work?
What is the opportunity cost of an hour of work?
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According to the Rational Rule for Workers, when should workers work one more hour?
According to the Rational Rule for Workers, when should workers work one more hour?
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What is the substitution effect of a wage increase?
What is the substitution effect of a wage increase?
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What is the income effect of a wage increase?
What is the income effect of a wage increase?
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What are the three reasons that the market labour supply curve is upward sloping?
What are the three reasons that the market labour supply curve is upward sloping?
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The market labour supply tells us the total labour supply in the market for a given wage rate.
The market labour supply tells us the total labour supply in the market for a given wage rate.
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Wage changes in other similar labour markets can have an effect on the total labour supply in a specific market.
Wage changes in other similar labour markets can have an effect on the total labour supply in a specific market.
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Changes in the underlying population will not affect the total labour supply at every wage rate.
Changes in the underlying population will not affect the total labour supply at every wage rate.
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Changes in benefits of not working can either increase or decrease the overall willingness of workers to work at any given wage.
Changes in benefits of not working can either increase or decrease the overall willingness of workers to work at any given wage.
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Changes in nonwage benefits will only affect the total compensation that a worker gets at a specific wage.
Changes in nonwage benefits will only affect the total compensation that a worker gets at a specific wage.
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CERB benefits in March 2020 had no effect on the equilibrium wage and employment level.
CERB benefits in March 2020 had no effect on the equilibrium wage and employment level.
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In labour markets where public health measures restricted work activity, both labour demand and labour supply decreased.
In labour markets where public health measures restricted work activity, both labour demand and labour supply decreased.
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What is the effect of a decrease in nonwage costs of labour on labour demand?
What is the effect of a decrease in nonwage costs of labour on labour demand?
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How does an increase in the price of the output affect labour demand?
How does an increase in the price of the output affect labour demand?
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If the substitution effect dominates the scale effect when the price of capital decreases, what happens to labour demand?
If the substitution effect dominates the scale effect when the price of capital decreases, what happens to labour demand?
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What happens to the marginal revenue product of labour when labour productivity increases due to technological change?
What happens to the marginal revenue product of labour when labour productivity increases due to technological change?
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Which of the following describes the Rational Rule for Employers in hiring decisions?
Which of the following describes the Rational Rule for Employers in hiring decisions?
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What happens to labour demand when there is a technological advancement that enhances productivity?
What happens to labour demand when there is a technological advancement that enhances productivity?
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What is the primary reason why the labour demand curve slopes downwards?
What is the primary reason why the labour demand curve slopes downwards?
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How does an increase in the price of capital typically affect labour demand?
How does an increase in the price of capital typically affect labour demand?
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How does the income effect of a wage increase influence a worker's decision to work more hours when leisure is considered a normal good?
How does the income effect of a wage increase influence a worker's decision to work more hours when leisure is considered a normal good?
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Which of the following is NOT a reason why the market labour supply curve is upward sloping?
Which of the following is NOT a reason why the market labour supply curve is upward sloping?
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What effect do wage changes in competing labour markets have on the total labour supply in a specific market?
What effect do wage changes in competing labour markets have on the total labour supply in a specific market?
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How did the introduction of CERB benefits affect the opportunity cost of working?
How did the introduction of CERB benefits affect the opportunity cost of working?
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Which factor can lead to an increase in labor supply at every wage level?
Which factor can lead to an increase in labor supply at every wage level?
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What is one reason demographic shifts may affect the labor supply curve?
What is one reason demographic shifts may affect the labor supply curve?
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What might lead to a decrease in workers’ willingness to work at any wage level?
What might lead to a decrease in workers’ willingness to work at any wage level?
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Which of the following factors is least likely to shift the labor supply curve?
Which of the following factors is least likely to shift the labor supply curve?
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Study Notes
Chapter 11: Labour Markets
- Labour markets are competitive for hair stylists.
- The vertical axis of a labour market diagram represents hourly wage.
- The horizontal axis represents the quantity of hours worked.
- Labour supply decisions are made by workers.
- Labour demand decisions are made by employers.
- Equilibrium wage equates quantity supplied and demanded.
Market Labour Demand Curve
- In a competitive labour market, employers are wage-takers.
- Marginal product of labour is the output increase from hiring one more worker.
- Marginal revenue product of labour is the revenue increase from hiring one more worker, (marginal product * price).
- The rational rule for employers is to hire additional workers as long as the marginal revenue product is greater than or equal to the wage.
- Labour demand is downward sloping, due to diminishing marginal product of labour.
Shifts in the Derived Labour Demand Curve
- Demand for labour is derived from the demand for the goods/services it produces.
- Price increases in outputs increase labour demand for all wages.
- A decrease in the price of capital has an ambiguous effect on the demand for labour (both substitution and scale effects).
- Scale effect: Lower capital costs encourage output/production increases, which increases demand for labor.
- Substitution effect: Lower capital costs lead to substitution of capital for labor, which reduces demand for labor.
- Labour demand increases with labour productivity improvement (technology or management).
- Labour demand decreases with higher non-wage costs (benefits, taxes).
Individual Labour Supply Curve
- Opportunity cost of work is an hour of foregone leisure.
- Rational rule for workers is to work additional hours if their wage is at least as large as the marginal benefit of another hour of leisure.
- Substitution effect of a wage increase: Increase the relative price of leisure, leading to more hours worked.
- Income effect of a wage increase: Increased income leads to a decrease in work hours and increase in leisure (normal good).
Market Labour Supply Curve
- Market labour supply is upward sloping due to factors:
- Existing workers may work more hours, though this effect may be small (offsetting income effect).
- New people enter the workforce (students, homemakers, retirees).
- People may switch occupations where wages are rising.
Shifts in the Labour Supply Curve
- Wage changes in other competitive labour markets shift labour supply.
- Demographic shifts or immigration changes the number of potential workers.
- Changing non-wage benefits affect willingness to work at each wage.
- Changes in other income sources or benefits unrelated to employment affect the labour supply decision.
Effect of CERB Benefits on Equilibrium Wage and Employment
- CERB (Canada Emergency Response Benefit) increased the opportunity costs of working, thus decreasing the labour supply.
- This resulted in upward pressure on equilibrium wage rates.
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Description
This quiz explores the concepts of labour markets as discussed in Chapter 11. It covers competitive wage determination, labour supply and demand, and the dynamics of the labour demand curve. Understand the factors influencing wages and employment decisions in this engaging quiz.
