The demand and supply of labour

What is aggregate demand?

Total demand for goods and services in an economy

What is the equation for aggregate demand?

C+I+G+X-M

What is human capital?

total sum of knowledge, skills, training and experience of workers that contribute to the production process, which reflects quality of labour

What is a labour market?

A market where individuals seeking employment interact with employers who want to obtain the most appropiate labour skills for their production process

What happens as wages fall and what does this for the demand wages curve?

as wages fall, firms will demand (employ more labour) and the curve is downward sloping

What is the demand for labour?

It is a derived demand, the most significant influence on a firm’s demand will be output factors

The demand for labour is derives from?

changes in aggregate demand

How do changes in the total level of economic activity influence demand for labour?

If economic activity is declining, there will be a fall in spending, leading to a fall in production, then a reduced demand for labour.

How do conditions in the firms industry and demand for products influence demand for labour?

Any changes in the pattern of consumer demand will affect the pattern of demand for labour, therefore a change in consumer taste and preferences for goods and services will see a change in the allocation of labour between different industries

What does the productivity of labour help firm's choose?

the choice between labour or capital in their production process

Labour productivity depends on?

the quality of the workforce

What impact does labour productivity have on the demand for labour in the short term?

if aggregate demand is rising faster than the increase in productivity, there will be more demand for labour.

What impact does labour productivity have on the demand for labour in the long term?

Higher productivity means labour is more attractive

What is the cost of capital represented by?

interest rates and special tax allowances

Who supplies labour?

individuals supply labour when they are able and willing to work

The supply curve is?

upward sloping

How do pay levels influence the supply of labour?

The higher the wage, the more willing people are to sacrifice leisure to supply their labour

How do working conditions influence the supply of labour?

Attractive working conditions encourage a higher supply of labour

How does education, skills and experience requirements influence the supply of labour?

the level of skill required for a job can limit the supply of labour

How does occupational mobility influence the supply of labour?

the ability of labour to move between different occupations, mainly depends on the level of education and skill required

How does geographical mobility influence the supply of labour?

the ability to move between different locations. Factors that limit geographical mobility are costs and personal upheaval, remote locations have limited geographical mobility

Labour force participation rate can be determined by?

the percentage of the population aged 15 years old and over, who are in the workforce. Labour force/ population over 15 × 100

What influences the participation rate?

state of the economy, social attitudes, ageing population, school retention rates

When does the labour participation rate increase?

it increases during booms

What are two groups that impact the participation rate?

young people looking for their first job, and women with young children returning to the workforce

How do government policy decisions influence the supply of labour?

qualification requirements and license restrictions

How do professional associations influence the supply of labour?

impose standards of educations, which then restricts the supply of labour

What is unemployment?

When a person in the labour force is actively seeking work but is unable to find employment. People who have given up on looking for work are not counted as unemployed, they fall out of the labour force entirely

What is the working age population?

the total member of people in australia aged 15 and over who are civilians and not institutionalised. This is the pool from which the labour force is drawn

What is the labour force?

unemployed and employed, excluding those who are not looking for work

What is participation rates?

the percentage of the working age population that is in the labour force

How to calculate the labour force?

employed + unemployed = labour force

How to calculate the unemployment rate?

number employed/ labour force x 100

The quality of the labour force refers to?

the general health, motivation, skill, experience, and levels of education and training possessed by people in the labour force. This is also referred to as human capital

What are the factors that influence the size and quality of the Australian labour force?

population size, age distribution, education patterns