The Labour Market Supply and Demand
The Labour Market Supply and Demand
The Labour Market Supply and Demand
uk
ARP
MRP = MPP x P
Number Employed
5.50 MCL
ARP
MRP = MPP x P
20 21
Number Employed
DL
10 15 19 Number Employed
SL
5.50
Excess Demand
DL1
DL
Q1 Q2
Number employed
SL1
6.00
5.00
Excess Supply
DL
Q1 Q2
Number employed
Economic Rent
Wage Rate (£ per hour)
The supply of labour curve
shows the relationship between
the wage rate and the number
SL of people offering their labour in
terms of the number of hours
worked.
At a wage rate of £6.00 per
hour, employees are willing to
6.00 offer Q1 hours. Some in the
market are not willing to work
for any less than that and some
would be willing to work for less
than £5.00.
The area under the supply
curve is referred to as the
‘Transfer Earnings’ of the
Transfer factor.
Earnings
Q1 Number of hours worked
Economic Rent
Wage Rate (£ per hour) Some individuals would have been
Those
totalindividuals earn £6.00 per hour –
The
prepared value of economic
to work Q2 hoursrentfor is shown
£4.00
they
thetherefore earn an amount in excess
byper yellow shaded
hour. triangle.
than they were prepared to offer their
services
Assumefor – this
that £6.00is termed
per hour‘Economic
is the
SL Rent’.
current market wage rate for this
factor.
6.00
Economic
Rent
4.00
DL
Q2 Q1 Number of hours worked
Economic
W1 Rent
DL
Q1 Number of hours worked