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Transcript of Economics
Labour Market - It is the supply of labour available in relation to available work
labour - It is the willingness of firms to employ labour for a given wage level.
Labour - It is the willingness of labours to work in a firm for a given wage level.
The Labour Market
There are many labour markets in an economy. Labour markets can be local, national or even international if workers are willing to migrate. Labour markets are also distinguished by the experience, age and time of employment.
Wage rate- it is the amount of money workers get paid per hour.
Salary - the money workers get paid per month.
Compensating Differentials- The difference in wages offered to counter balance the desirability of an occupation
The demand for Labour
Firms and government organizations employ labour and other resources to produce goods and services. The demand for labour is therefore derived from the fact that people and other organizations want and need goods. It is followed by the fact that more the more goods are demanded the higher their price so more revenue which means more demand for labour.
More people want goods and services
More sales means more profit which then means a aim of business is being fulfilled
Business aims are fulfilled so the firm might decide to expand and grow
More demand for labour
More work requires more labour to do it and ensure the business runs smoothly
The supply of Labour
The total supply of labour in an economy is it's labour force. The supply of labour to a particular labour market for an occupation depends on how many people are willing and able to do the job on offer.
For example, the market supply of train drivers will consist of people currently employed as train drivers, people employed in other occupations who want to become train drivers, and people who are employed but are also willing and able to be train drivers. Then, it is likely that as the wages of train drivers rise more people will want to become train drivers. The market supply curve for train drivers will slope upwards.
What causes the demand for labour to shift?
Consumer demand for goods and services
Changes in the price and productivity of capital
Charges in other employment costs
what can cause the supply of labour to shift?
Changes in the net advantages of an occupation
Education and training
Will the wage equilibrium wage change?
Like any commodity, the wages of any group of workers will rise and fall given changes in the forces of demand and supply. A rise in the demand for labour or fall in it's supply, will bring market wages to rise. However, a fall in the demand or rise in the supply of labour will bring the market wage down.
Why do people earn different amounts?
Different abilities and qualifications
Lack of information about the job
Why do people in the same job earn different amounts?
Regional differences in labour market conditions
Length of service
Local pay agreements
Regional differences in the labour market conditions
Length of service
Local pay agreements
Public- private sector pay gap
Skilled and unskilled workers
Industrial wage differentials
Gender pay gap
International pay differentials- Making international comparisons of wages and earning is difficult since data is not always available. There is also a huge difference between the income in different countries. Highly developed countries have higher wage rates than low economically developed countries. This is because the highly developed countries have higher GDP and better rules to protect the workers rights. Also, the living costs in highly developed countries are high so the citizens are paid more.
To protect the rights of employees and employers
To outlaw and regulate the restrictive practices of powerful trade unions and employers
To raise the wages of very low paid workers
To reduce unemployment
To stop discrimination
People consume goods and services to fulfill their wants and needs. This process is called consumption. The money that people use to satisfy their wants is their disposable income.
Most low income earners spent most of their money on basic needs for survival while other higher income earners spend their money in luxury items.
Consumption and pattern trends
Factors affecting total consumer expenditure
Most people consume goods and services to satisfy their wants and fulfill their basic needs. Pattern of consumers expenditure are greatly different between people with similar incomes simply because people have different tastes. Products that are experience goods are ones that can be are often wanted by the consumers again and again and are influenced by the choices of other consumers who have used it before.
Why do people consume goods and services?
Disposable income is the money remaining after deducting the tax, rents and other living costs. This money is spent on the consumption of goods and services.
Spending, Saving, Borrowing
Real incomes have risen
People work fewer hours than many years ago
Social attitudes have changed
Couples are marrying later in life and having fewer children
People have become more health conscious
Concern for the environment is growing
Technology has advanced rapidly
What determines savings?
Why do people save?
Availability of saving schemes
Why do people borrow money?
A consumer may borrow money to increase their expenditure on goods and services, usually for a particular good or service they wants such as a big house. They can then make loan repayments over time from their future earnings. However, people with low incomes may borrow simply pay everyday expenses. loans to buy property are called mortgages and may take many years to pay off.
What determines the level of borrowing?
Ways of borrowing and availability of credit
Problems with borrowing
Borrowing money isn't a problem as long as you can afford to repay the loan with interest. If income rises each year then loan and interest repayment become easier to repay. However, if they keep on borrowing and incomes are low the business may be forced to shut down and lose everything at risk.
Saving involves a person delaying consumption until some later time when they withdraw and spend their saving plus any interest. Just like consumer spending, the more disposable income a person has the more they will be able to save. So as income rises total savings tend to rise.