Economic Rent and Transfer Earnings As well as receiving different wages, the nature of the wages that different groups of workers receive varies Transfer earnings are what a worker could earn in their best paid alternative employment – the opportunity cost of...
The Short-run Supply Curve of Labour In the short-run, there’s insufficient time for workers to change occupation Therefore, the key influence in the short-run is the wage-rate. At low wages, a rise in the wage rate will cause a worker to work more hours (extension on...
The Long-run Supply Curve of Labour In the long-run, there is time for people to change their occupation In this time period, the supply of labour to a given firm or occupation is influenced by the net advantages of the job These include both the pecuniary (financial)...
The Elasticity of Supply of Labour The extent to which the supply of labour changes as a result of a change in the wage rate is measured by the elasticity of supply of labour: Elasticity of Supply of labour = (%change in the quantity of labour supplied)/(%change in...
Wage Determination In a competitive labour market, the demand for and the supply of labour play the key roles in determining wages. Wages are likely to be high when demand is high and inelastic, and supply is low and inelastic Conversely, wages are likely to be low...
Wage Differentials Wage differentials are differences in wages such as that between brain surgeons and waiters They occur between occupations, industries, firms, regions, and within these categories Wage differentials can be explain by supply and demand, bargaining...
Derived Demand The demand for labour is a derived for demand - labour is not wanted for its own sake, but for what can be produced with it Therefore, the number of workers a firm wishes to employ depends principally on the revenue that can be earned from what is...
The Elasticity of Demand for Labour While a change in MP or MR will move the demand curve, a change in wage rate will cause a movement along the demand curve The extent to which demand changes as a result of the change in wage rate is measured by the elasticity of...