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Labour Economics
Week 1: The theory of supply
Labour Supply
Focus on the Behaviour of Workers:
Labour Economics 1
, This section emphasizes understanding the actions and decisions
made by workers in the labor market.
Labour Supply Decisions:
Whether to Work:
Labour force participation: This involves deciding whether to
enter or stay in the labor market. Factors influencing this
decision might include personal circumstances, economic
conditions, and available job opportunities.
How Long to Work:
Part-time vs. full-time: This refers to the choice between
working fewer hours (part-time) or more hours (full-time). This
decision can be influenced by personal needs, financial
requirements, and the availability of part-time or full-time
positions.
What Occupation:
Type of job: This involves choosing a specific occupation or
profession. Factors affecting this choice include individual skills,
interests, educational background, and job market demand.
Where to Work:
Geographic mobility, migration: This refers to the decision about
the location of employment. Workers may choose to move or
commute to different regions, cities, or even countries, based on
job opportunities, living conditions, and other personal or
economic factors.
What are the 3 factors that influence ones decision to work
1. the opportunity cost of the good (which is often equal to market
prices)
2. One’s level of wealth
3. One’s set of preferences
What is the opportunity cost of leisure
One’s wage rate - the extra earnings that a worker can take home from
an extra hour of work.
Labour Economics 2
, How do you define Wealth and income as economic concepts
Wealth is what you have accumulated over time, while income is what
you earn regularly.
NB Definitions
What is a Labour Force:
Defined as people who are either working or actively looking for
work.
This includes both employed individuals and those who are
unemployed but seeking employment.
What is the Labour Force Participation Rate:
This is the percentage of a given population that is either
employed or actively looking for work.
It provides an indication of the active portion of the population
that is contributing to or seeking to contribute to the economy.
How do we categorise the population with regard to Labour Force
and not in labour force
Labour Economics 3
, Population: The entire group of people being considered.
Labour Force: A subset of the population that includes those
who are either employed or unemployed but actively looking for
work.
Not in Labour Force: Individuals who are neither working nor
looking for work, such as retirees, students, or homemakers.
Employed: Individuals within the labour force who have jobs.
Unemployed: Individuals within the labour force who do not
have jobs but are actively seeking employment.
Income Effect
Basic definition
When wages increase, a worker's overall wealth or potential
income increases.As a result, the worker may choose to
work fewer hours because they can maintain the same
standard of living with less work. This is because they now
have more income for each hour they work.
Labour Economics 4
Labour Economics
Week 1: The theory of supply
Labour Supply
Focus on the Behaviour of Workers:
Labour Economics 1
, This section emphasizes understanding the actions and decisions
made by workers in the labor market.
Labour Supply Decisions:
Whether to Work:
Labour force participation: This involves deciding whether to
enter or stay in the labor market. Factors influencing this
decision might include personal circumstances, economic
conditions, and available job opportunities.
How Long to Work:
Part-time vs. full-time: This refers to the choice between
working fewer hours (part-time) or more hours (full-time). This
decision can be influenced by personal needs, financial
requirements, and the availability of part-time or full-time
positions.
What Occupation:
Type of job: This involves choosing a specific occupation or
profession. Factors affecting this choice include individual skills,
interests, educational background, and job market demand.
Where to Work:
Geographic mobility, migration: This refers to the decision about
the location of employment. Workers may choose to move or
commute to different regions, cities, or even countries, based on
job opportunities, living conditions, and other personal or
economic factors.
What are the 3 factors that influence ones decision to work
1. the opportunity cost of the good (which is often equal to market
prices)
2. One’s level of wealth
3. One’s set of preferences
What is the opportunity cost of leisure
One’s wage rate - the extra earnings that a worker can take home from
an extra hour of work.
Labour Economics 2
, How do you define Wealth and income as economic concepts
Wealth is what you have accumulated over time, while income is what
you earn regularly.
NB Definitions
What is a Labour Force:
Defined as people who are either working or actively looking for
work.
This includes both employed individuals and those who are
unemployed but seeking employment.
What is the Labour Force Participation Rate:
This is the percentage of a given population that is either
employed or actively looking for work.
It provides an indication of the active portion of the population
that is contributing to or seeking to contribute to the economy.
How do we categorise the population with regard to Labour Force
and not in labour force
Labour Economics 3
, Population: The entire group of people being considered.
Labour Force: A subset of the population that includes those
who are either employed or unemployed but actively looking for
work.
Not in Labour Force: Individuals who are neither working nor
looking for work, such as retirees, students, or homemakers.
Employed: Individuals within the labour force who have jobs.
Unemployed: Individuals within the labour force who do not
have jobs but are actively seeking employment.
Income Effect
Basic definition
When wages increase, a worker's overall wealth or potential
income increases.As a result, the worker may choose to
work fewer hours because they can maintain the same
standard of living with less work. This is because they now
have more income for each hour they work.
Labour Economics 4
