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Sec3- Changes in Earning (Labour (Changes in demand (This is a derived…
Sec3- Changes in Earning
Labour
Changes in demand
This is a derived demand. Higher demand for products leads to more workers employed
Rise in labour productivity
Rise in price of capital so labour replaces capital
With higher demand,
Earning might increase
Wage rate may be pushed up
Bonuses increased
More overtime with higher rate
Changes in Supply
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Factors that decrease supply:
Fall in labour force
Rise in qualifications required-reduce eligible people
Reduction in non-wage benefits of the job
Rise in wage or non-wage benefits of other jobs
Elasticity
Demand
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Elasticity of demand for product produced
higher wages=higher cost of production=rise in price of product=low demand for labour. If demand for product is elastic them demand for labour is elastic
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Elasticity of Demand for Labour: a measure of responsiveness of demand for labour to a change in wage rate
Supply
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Time period
supply becomes elastic in the long run because workers notice wage changes and have time to get qualified
Elasticity of supply of labour: a measure of the responsiveness of supply of labour to a change in wage rate
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