The Labour Market: Workers, Wages, and Unemployment - Understanding Labor Supply

13 important questions on The Labour Market: Workers, Wages, and Unemployment - Understanding Labor Supply

What is a reservation wage?

The minimum wage a person will accept to start working. Below this wage, they might rather stay home, rest, study, or pursue hobbies.

What is the opportunity cost of working?

Lost leisure time represents the cost of working. Enjoyable activities are sacrificed for work.

How do wages relate to lost leisure?

Higher wages must compensate for lost leisure time to make work appealing.
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What influences people's acceptance of risky jobs?

Higher wages are demanded for risky, boring, or stressful jobs, known as wage premium.

What influences the size of the working-age population?

Age range of 15-64 indicates potential workers. A larger population supports more workers.

How does domestic birthrate affect labor supply?

Low birthrates mean fewer young workers entering the labor market in the future.

What happens when people immigrate or emigrate?

Immigration increases labor supply, while emigration decreases it.

How do entry and retirement ages affect labor supply?

Early retirement or late entry reduces the labor supply in the market.

What is the participation rate?

It indicates what percentage of working-age people choose to work.

What do some people prefer at low real wages?

At low real wages, many choose spending time with family or pursuing hobbies.

What changes as real wages rise regarding leisure?

Higher real wages increase the opportunity cost of leisure time.

How do individuals view working as real wages rise?

More individuals see greater benefit in working rather than relaxing.

What is the impact on the labor supply curve when real wages increase?

The labor supply curve slopes upward as more individuals join the workforce.

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