OCR A Level Economics
OCR A Level Economics The Labour Market Exam Questions
Free OCR A Level Economics exam questions for The Labour Market, with a mark scheme for every pack. Covers labour demand and supply, marginal revenue product, wage determination, monopsony, trade unions, minimum wages, wage differentials and inequality.
The Labour Market exam questions
1 question pack of real past exam questions, each with its mark scheme. Do not stop after a few: answer as many as you can without notes, then mark every answer with the mark scheme. The more questions you do, the more quickly you will spot how examiners ask about each idea.
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A-Level Economics Flashcards for 2027 Onwards
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About OCR A Level Economics The Labour Market
The Labour Market topic in OCR A Level Economics applies microeconomic analysis to workers and wages. You learn why labour demand is a derived demand, what affects labour supply, and how wages are determined in competitive markets and in markets with imperfections such as monopsony employers and trade unions. You also study government intervention, including the national minimum wage, and the causes of wage differentials and inequality. The topic is assessed on the Microeconomics paper and may also feature in the Themes in Economics paper. Examiners expect labour market diagrams and balanced evaluation, especially of minimum wages and of the effects of migration.
What you need to know
- Demand for labour Labour demand is derived from demand for the product. Marginal revenue product (MRP = MPP x MR) shows the value of extra workers; demand shifts with productivity, product demand and the cost of capital.
- Supply of labour Influenced by wages, working conditions, training requirements, demographics, migration, and taxes and benefits. Labour supply to an individual firm and to an occupation.
- Elasticity The elasticity of labour demand and supply depends on the proportion of labour costs, substitutability of capital, the time period and the training needed.
- Wage determination Competitive labour markets set the wage where demand meets supply. Wage differentials result from skills, productivity, compensating differentials, discrimination and bargaining power.
- Imperfect labour markets Monopsony employers pay lower wages and employ fewer workers. Trade unions use collective bargaining to raise wages. Bilateral monopoly arises when a union faces a monopsony.
- Government intervention National minimum wage, national living wage, maximum wages, public sector pay and policies to improve labour mobility. Evaluate the effects on employment and inequality.
Common mistakes in The Labour Market
- Treating labour demand as unaffected by product demand. It is a derived demand.
- Assuming a minimum wage always raises unemployment. In a monopsony it can increase employment.
- Labelling the monopsony diagram incorrectly. The marginal cost of labour (MCL) lies above the average cost of labour (supply).
- Explaining wage differentials only by effort. Use MRP, the supply of workers with the right skills, and imperfections.
- Ignoring the effects of migration on both sides. Migration can raise labour supply but also raise demand through spending.
Try three The Labour Market exam-style questions
1. A firm employs an extra worker whose marginal physical product is 20 units per day. The product sells for 6 pounds in a competitive market. Calculate the MRP of the worker and state whether the firm should hire them at a daily wage of 110 pounds. (3 marks)
Show the mark scheme answer
MRP = 20 x 6 = 120 pounds per day; MRP exceeds the wage of 110 pounds; so the firm should hire the worker.
2. Explain why a monopsony employer may pay a lower wage than a competitive market. (4 marks)
Show the mark scheme answer
A monopsony is the only or dominant buyer of labour; to hire more workers it must raise the wage for all workers, so MCL is above ACL; it employs where MCL = MRP; pays the wage on the supply curve, below the competitive level; employs fewer workers.
3. Evaluate the impact of an increase in the national living wage on a low-wage industry. (12 marks)
Show the mark scheme answer
In a competitive market wages above equilibrium cause excess supply of labour and job losses; firms may raise prices or cut hours; in monopsony employment may rise; evaluation: depends on elasticity of labour demand; firms may raise productivity; higher spending raises AD; reduces in-work poverty and inequality; size of increase matters; supported judgement.
The Labour Market FAQs
What does OCR A Level Economics The Labour Market cover?
It covers labour demand and supply, marginal revenue product, wage determination, monopsony, trade unions, minimum wages and wage differentials.
Which paper is The Labour Market examined in?
It is examined in Paper 1, Microeconomics (H460/01) and may appear in Paper 3, Themes in Economics.
Which labour market diagrams do I need?
Learn the competitive labour market, a minimum wage above equilibrium, the monopsony diagram with MCL and ACL, and the effect of a trade union raising wages.
