ECS2604 Assignment 1
Question Answer Explanation
1. 2 Intersection of Demand and Supply
2. 5 Neither workers nor enterprises exercises any influence over the
market wage
3. 2 In a negative relationship, as one variable increases, the other decreases
4. 5
5. 2 𝐴𝑐𝑡𝑢𝑎𝑙 𝐿𝑎𝑏𝑜𝑢𝑟 𝐹𝑜𝑟𝑐𝑒 2𝑚𝑖𝑙
𝐿𝐹𝑃𝑅 = ∗ 100 = ∗ 100 = 66.67%
𝑃𝑜𝑡𝑒𝑛𝑡𝑖𝑎𝑙 𝐿𝑎𝑏𝑜𝑢𝑟 𝐹𝑜𝑟𝑐𝑒 3𝑚𝑖𝑙
6. 2 If the (negative) income effect dominates the (positive) substitution
effect, the increase in wage rate decreases work hours
7. 5 500 000
𝐿𝐹𝑃𝑅19 = ∗ 100 = 5%
10 000 000
1 200 000
𝐿𝐹𝑃𝑅20 = ∗ 100 = 10%
12 000 000
8. 2 For Marginal returns, subtract the totals
9.
10. 3
11. 4 LF = 8mil+3mil+2.5mil
12. 2
13. 4 600 000 − 500 000
% change in employment = ∗ 100 = 20%
500 000
1 100 000 − 1 000 000
% change in employment = ∗ 100 = 10%
1 000 000
% change in employment 20
Employment elasticity = = =2
% change in economic growth 10
14. 5 The firm’s short-run demand for labour can therefore be indicated by
the downward sloping MRP curve.
15. 3 To maximise profits, the monopsonist enterprise must ensure that its
marginal cost is equal to its marginal product (MRP).
16. 1
17. 2 The spill over effect refers to the decline in non-union wages caused
by displaced union workers supplying their services in the non-
unionised labour market – they will “spill over” to the non-unionised
sector. It thus appears as if the union has caused a much bigger wage
differential than is in actual fact the case.
18. 4 Internal labour market - An organisational unit where the pricing and
allocation of labour are governed by a set of administrative rules rather
than by market forces. Jobs within the internal market are usually filled
by the promotion of workers who are already within the internal labour
market and these jobs are thus shielded from normal competitive
forces. Entry is normally from the bottom only (section 4.2.3).
Cecily Moyo 0785729743
Question Answer Explanation
1. 2 Intersection of Demand and Supply
2. 5 Neither workers nor enterprises exercises any influence over the
market wage
3. 2 In a negative relationship, as one variable increases, the other decreases
4. 5
5. 2 𝐴𝑐𝑡𝑢𝑎𝑙 𝐿𝑎𝑏𝑜𝑢𝑟 𝐹𝑜𝑟𝑐𝑒 2𝑚𝑖𝑙
𝐿𝐹𝑃𝑅 = ∗ 100 = ∗ 100 = 66.67%
𝑃𝑜𝑡𝑒𝑛𝑡𝑖𝑎𝑙 𝐿𝑎𝑏𝑜𝑢𝑟 𝐹𝑜𝑟𝑐𝑒 3𝑚𝑖𝑙
6. 2 If the (negative) income effect dominates the (positive) substitution
effect, the increase in wage rate decreases work hours
7. 5 500 000
𝐿𝐹𝑃𝑅19 = ∗ 100 = 5%
10 000 000
1 200 000
𝐿𝐹𝑃𝑅20 = ∗ 100 = 10%
12 000 000
8. 2 For Marginal returns, subtract the totals
9.
10. 3
11. 4 LF = 8mil+3mil+2.5mil
12. 2
13. 4 600 000 − 500 000
% change in employment = ∗ 100 = 20%
500 000
1 100 000 − 1 000 000
% change in employment = ∗ 100 = 10%
1 000 000
% change in employment 20
Employment elasticity = = =2
% change in economic growth 10
14. 5 The firm’s short-run demand for labour can therefore be indicated by
the downward sloping MRP curve.
15. 3 To maximise profits, the monopsonist enterprise must ensure that its
marginal cost is equal to its marginal product (MRP).
16. 1
17. 2 The spill over effect refers to the decline in non-union wages caused
by displaced union workers supplying their services in the non-
unionised labour market – they will “spill over” to the non-unionised
sector. It thus appears as if the union has caused a much bigger wage
differential than is in actual fact the case.
18. 4 Internal labour market - An organisational unit where the pricing and
allocation of labour are governed by a set of administrative rules rather
than by market forces. Jobs within the internal market are usually filled
by the promotion of workers who are already within the internal labour
market and these jobs are thus shielded from normal competitive
forces. Entry is normally from the bottom only (section 4.2.3).
Cecily Moyo 0785729743
