Introduction to Labour Goals for todays lesson Supply

Introduction to Labour

Goals for today’s lesson Supply of labour Demand for labour Backward bending supply curve Equilibrium wage rate.

Labour: Factor of producution the human activity directed towards the production of wealth.

Demand for Labour: Derived Demand Labour is demanded for its contribution to the production process or from the demand for the goods it produces. The price of labour is determined by demand supply. ***The demand for any factor of production is its Marginal Revenue Product (MRP) curve***

Supply of Labour Supply of labour in the economy is the total number of hours worked in the economy during a specific period.

Labour Supply Curve

Backward Bending Supply Curve At low levels of wages you will respond positively to wage increase. High benefit to you because you are poor vs. time you give up to work (cost) As you get higher wages you substitute away from work to leisure time. Most workers never get the chance to work less. Free time has a higher benefit to the person than doing an extra hours work. David Beckham vs. Tesco Worker

Backward Bending Supply Curve

Equilibrium Wage Rate When the demand supply curves are brought together, we can find the equilibrium wages rate for labour in the economy. The curves intersect at We with quantity Qe. This point represents the equilibrium wage rate in the economy. Illustrate this!

Equilibrium Wage Rate

How restricting entry into a profession affects supply of labour Some professions may curtail the admission of newly qualified staff by increasing the standards of entrance exams. This has the effect of decreasing supply and thus increasing the wage rate. The supply curve shifts to the left, indicating a lower quantity and a higher wage rate. Illustrate it!

How restricting entry into a profession affects supply of labour