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3.5 - Labour markets - Coggle Diagram

- - - - Markets that have elastic demand tend to have these characteristics:
        
        low skills required
        
        many substitutes
        
        can be replaced by technology
        
        producing low cost items
        
        item producing has a low demand for it
        
        Vice versa for high elasticity
    - - Firm want demand to become more elastic over so they can pay their worker less
    - - the demand for labour is dependent on the demand for the final product
- - - - As you get paid more there is more incentive to work (like a normal S curve)
        
        However, at a point a person may feel they have earnt enough and want to take a step back and enjoy life more. Hence why you get the curve
      - This supply curve questions the theory of tax cuts. However, like all factors, each person will respond differently to pay cuts or rasies.
- - - - MRP can be increased through increased skill or demand for your product
- - - - Elastic demand (-1 to infinity) will cause firms to cut back massicley if the minimum wage increases. Inelastic demand (-1 to 0) will cause a lesser effect on wage. I the Uk our average elasticity of demand is estimated to be roughly -0.4
    - - This causes a shortage of supply of Q1 to Q2 which results in higher unemployment
      - However, now the wage is increased there is a higher incentive to work
      - In the Uk the minimum national wage is only slightly above the equilibrium therefore there ins't much of a market distortion. This means there is very little unemployment. This is also due to that the minimum wage was quite low to begin with
  - - - However, failure to police the labour market also results in market failure