AQA A-Level Economics: Labour Markets

These flashcards cover essential concepts related to Labour Markets as per the AQA A-Level Economics syllabus.

Derived Demand for Labour

Demand for labour that depends on the demand for the goods and services workers produce.

Marginal Revenue Product (MRP)

The additional revenue generated from employing one extra worker.

MRP Formula

MRP = Marginal Product (MP) × Marginal Revenue (MR).

Profit-Maximising Condition

Firms employ workers up to the point where MRP = wage.

Supply of Labour

The number of workers willing and able to work at different wage rates.

Factors Increasing Demand for Labour

Increase in demand for the product; increase in productivity.

Technology's Effect on Labour Demand

It can increase demand (if complementary) or decrease demand (if it replaces workers).

Competitive Labour Market Wages Determination

By the intersection of labour demand and labour supply.

Monopsony Employer

A single dominant employer with wage-setting power.

Why Monopsonists Pay Lower Wages

They maximise profit where MRP = MC of labour.

Elasticity of Demand for Labour

The responsiveness of quantity demanded of labour to a change in wages.

Determinants of Elasticity of Labour Demand

Ease of substitution; proportion of labour costs in total costs.

Trade Union

An organisation that represents workers' interests.

Ways Trade Unions Increase Wages

Collective bargaining; industrial action such as strikes.

National Minimum Wage

A legally enforced minimum price for labour.

Price Floor

A minimum price set above equilibrium.

Advantage of Minimum Wage

Reduces income inequality.

Disadvantage of Minimum Wage

May cause unemployment if set above equilibrium.

Occupational Immobility

When workers cannot switch jobs due to lack of skills.

Geographical Immobility

When workers cannot move location for jobs.

Causes of Geographical Immobility

High housing costs; family ties.

Labour Market Failure

When the free market fails to allocate labour efficiently.

Examples of Labour Market Failure

Monopsony power; imperfect information.

Effect of Immigration on Labour Supply

Increases supply of labour.

Wage Differentials

Differences in wages between workers or jobs.

Causes of Wage Differentials

Skills differences; demand and supply conditions.

Discrimination in Labour Markets

When workers are treated differently based on non-economic factors such as gender or ethnicity.

Labour Market Key Diagram

Labour demand and supply diagram.

Strong Answers in Exams

Include chains of reasoning, diagrams, and evaluation.

Chain of Reasoning

A logical sequence: cause → effect → final outcome.