Ch. 2: Overview of the Labour Market

Market

• Interaction of buyers and sellers

• Buyers demand products

• Sellers supplu products

• Workers are selling their labour for businesses to buy

Demand Curve

• Schedule

• Downwards sloping

• Inverse relationship between price and quanitity

Income Effect

• Lower prices mean consumers buying more

• Feeling like they have more money

Substitution Effect

Buying the cheaper product in place of the more expensive original

Factors that make Demand Increase or Decrease

• Price of related products or services

  • Substitutes and compliements

• Income levels of consumers

• Consumer or employer expectations

• Tastes and preferences (for workers)

• Number of buyers (employers)

Supply Curve

• Schedule

• For normal prod.

• Upward sloping, direct relationship betwen price and quanitity

• Higher price means suppliers are willing to prove more labour

  • Short run: Unit cost increases (needing sleep)

  • Law of diminishing return: Labour is not 24/7

Factors Affecting Supply (Shifts)

• Production costs

• Prcies of related prod. or services

  • How much you are paid for a different job

• Expected future prices

• State of tech.

• Number of suppliers (workers)

• Govt. regulations

• Weather conditions

Factors Affecting Quantity Supplied

• Point on the supply curve corresponding to a specific price

• Changes in the price of the product or service indicates a movemenet along the supply curve

Three Factors that Influence Price Elasticity of Demand?

• Number of subistitutes

• Luxury vs necessity

• Percentage of income spent on the prod.

AI + Globalization

• Opportunity to increase labour productivity

• Growth of foreign trade/investment

• Reduction of trade labour

• Difference in labour standards

Quanity Demand

• Is a point on the demand curve corresponding to a specific price

• Movement along the curve, but does not shift the curve

• A change in demand means a shift in the entire curve

Price Determinatio/ Equilibrium

• Market prices are determined by the intersection of demand and supply

• Disequilibrium

  • Shortage: When prices are too low

  • Surplus: When prices are too high

Elasticity Coefficent

• The responsiveness of quantity demanded to a change in price

• = % change in the quantity demand / % change in price

• elastic= > 1 (greater)

• inelastic= < 1 (lesser)

Four Difference Between the Labour Market and Markets for Other Products

1. Labour services are inseparable from people

2. Employment relations last longer

3. Workers and jobs are highly diverse

4. Labour markets are highly fragmented

Circular Flow Model

• Simple rep. of the relationship between firms and households

• Money flows

• Prod. markets and factor markets are included

• Equality of income and output in an economy