Lecture notes 3.5.2 Wage Rates

3.5.2 Wage Rates

The Demand of labour

 Demand for products
o More demand for products means more demand for labour
 Productivity of labour
o The more productive a work the higher the demand for them.
 Can be increased with education and training.
 Substitutes for labour





o Can be replaced by cheaper capital
o Means that labour will fall
 Shift demand curve to left.
 How profitable the firm is
o Higher the profits the more labour they can afford to employ
 The number of firms in the market
o Determines how many buyers of labour there are.
 NHS demand for labour is lower as it is a skilled profession
 Supply of labour = No of workers willing and able to work at the current wage X no of hours they
can work.
 When the wage rate changes but the quantity of labour stays the same there is a shift in
demand.


The Supply of labour

 Supply cure shows proportional relationship between the wage rate and the quantity of labour




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