The Market System (ch. 21-24)

Trade unions

________ are organisations representing people working in a particular industry or profession that protects their rights.

Collusion

________- informal agreements between firms to restrict competition.

Cartels

________- where a group of firms or countries join together and agree on pricing or output levels in the market.

wage rate

amount of money paid to workers for their services over a period of time.

oligopoly

market dominated by a few large firms.

equilibrium wage

supply and demand for labour are equal.

why does the supply curve for labour slope upwards?

wages and the quantity of labour supplied are proportional

Labour mobility

the ease with which workers can move geographically and occupationally between jobs.

how is wage rate determined

the interaction of the supply and demand for labour.

price wars

where one firm in the industry reduces price to force others to do the same

price fixing

where a number of firms agree to fix the price of a product to avoid price competition

features of an oligopoly

* few firms
* larger firms dominate
* different products
* barriers to entry
* collusion - informal agreements between firms to restrict competition
* non-price competition
* price competition

oligopoly advantages for consumers

* choice
* quality
* economies of scale
* innovation
* price wars

disadvantages of an oligopoly for consumers

* cartels
* no competition

why do value-added products or services have an increased value?

work has been done on them, they have been combined with other products and so on; this increase in value to the buyer is what the buyer pays for

factors affecting demand for labour

* demand for the product
* availability of substitutes
* productivity of labour
* other employment costs

what other employment costs can affect the demand for labour

* national insurance contributions
* recruitment costs
* pension costs
* training
* maternity pay

derived demand

demand that arises because there is demand for another good

factors affecting supply of labour

* population size
* migration
* age distribution of the population
* retirement age
* school leaving age
* female participation
* skills and qualification
* labour mobility

why is the supply of labour volatile

population growth and adjustments to retirement age

trade union aims

1. negotiate pay and working conditions
2. provide legal protection for workers
3. pressure governments to pass legislation improving workers’ rights
4. provide financial benefits

what have governments done to reduce the power of trade unions

banning secondary picketing and banning closed shops

secondary picketing

workers in one workforce striking in one group at a particular location to support striking workers in a different workplace

closed shops

companies where all workers must belong to a particular trade union

methods of avoiding job losses when trade unions force wages up

* rising labour productivity
* employers passing on wage increases to customers
* profit margins reduced

government intervention

where the government becomes involved in a situation in order to help deal with a problem

how can governments promote competition

* encourage the growth of small firms
* lower barriers to entry
* introduce anti-competitive legislation

examples of anti-competitive legislation

* eliminate practices which reduce competition
* promote and sustain competition in markets
* protect interests of consumers
* ensure freedom of trade

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what might firms do that is against consumer interests

* increasing prices to higher levels than they would be in competitive markets
* price fixing
* restricting consumer choice by market sharing
* raising barriers to entry

fair trade issues covered by government legislation

* prices
* information about products
* trading and age restrictions
* customer payment methods
* consumer rights
* promotion of products
* product quality
* product safety

reasons for minimum wage

* benefitting disadvantaged workers
* workers on low incomes can claim welfare benefits from the state
* higher wages motivate workers
* employers might ask workers to increase productivity

can minimum wage result in job losses?

it depends on the specific situation