1
Q
real wage
A
- nominal wage measured relative to the general price level
2
Q
increase in goods relative price
A
- price of computers increase
- value of marginal product of labour increases
- firm is able to hire more workers and earn profits
- graph shifts to the right
3
Q
labour supply curve
A
- higher real wage
- greater you are willingly to supply labour
- real wage is the opportunity cost of leisure and rewards to working
4
Q
shifts in the supply of labour
A
- australia’s pension reform of postponing retirement age
- > increase labour supply
- factors which lead to changes in the share of working-age population
5
Q
increase in productivity
A
- raises real wage
- demand curve goes to the right
- real wage increases and goes up, relative to supply curve
6
Q
increasing wage inequality
A
- wages of less skilled and less educated have fallen further behind those of better trained workers
- sectoral shift
- globalisation
- technological change
7
Q
sectoral shift
A
- boom in investment -> increase in demand for labour
- causes demand for labour shift right
8
Q
globalisation and demand for workers
A
- wages in 2 industries are equal
- increase inports cause domestic production to lower wages and employment
- the exporting industry increases, raising wages and employment
9
Q
why unemployment is a problem
A
- lost incomes and production
- lost human capital
- not everyone receives unemployment benefits
10
Q
measuring unemployment
A
- employed = have a job
- unemployed = who do not currently have a job but are actively looking for work
- labour force = employed + unemployed
11
Q
unemployment rate
A
- number of ppl employed / labor force * 100
eg. 12mil in labour force
0. 6 mil unemployed
= 5% unemployment
12
Q
labour force participation rate
A
labour force / working age population
- eg. 12mil, working age 18.3
65. 6 percent
13
Q
natural rate of unemployment
A
- no cyclical unemployment
- frictional + structural
14
Q
minimum wage laws
A
- reduction of wage prohibited by law
- unemployment last forever
- price floor
15
Q
impediments to full employment
A
- labour unions
- > call a strike, causes production, sales, profits to decrease
- > higher wages accepted
16
Q
marginal benefit
A
- value of additional worker’s marginal product
- > price of the good produced by the firm
- > workers marginal product
- -> how much production increases after an additional worker is hired
17
Q
structural unemployment
A
unemployment that results from a mismatch between skill and desired skills by businesses
18
Q
frictional unemployment
A
- arises from normal labor market turnover
- swapping of jobs
19
Q
cyclical unemployment
A
- arises from when a worker is laid off because of a recession / economy not doing well
20
Q
unemployment benefits
A
- give unemployed people more options
- increases time spent searching for an acceptable job
- increase their reservation wage
- should be set so that a) gives people more time to search but b) should not remove incentive to seek work actively
