WJEC A Level Economics
WJEC A Level Economics Demand and Supply in Labour Markets Exam Questions
Free WJEC A Level Economics revision for Demand and Supply in Labour Markets: what you need to know, common mistakes and exam-style questions with answers. Covers wage determination, labour demand and supply, wage differentials in Wales and the UK, flexibility, minimum wages and migration.
Practise Demand and Supply in Labour Markets with past papers
Once you have learnt this topic, find the Demand and Supply in Labour Markets questions in real WJEC A Level Economics past papers and mark them with the mark scheme. Doing lots of real questions is the quickest way to learn how examiners ask about each idea.
About WJEC A Level Economics Demand and Supply in Labour Markets
This AS microeconomics topic in WJEC Economics applies demand and supply to the labour market. You study the main influences on the demand for and supply of labour, the elasticity of each, and the causes and implications of wage differentials. WJEC adds a Welsh context: you are expected to investigate wages in Wales compared with the rest of the UK and the case for a regional minimum wage for Wales. The labour market issues section covers labour market flexibility, the national minimum wage and migration, linked to supply side performance. Marginal revenue product theory is not required. Examined in AS Units 1 and 2, this topic suits diagram based data response questions.
What you need to know
- Demand for labour Labour demand is derived from demand for the goods and services workers produce. It rises with higher product demand, higher labour productivity and higher prices of substitute capital, and falls with higher non-wage costs.
- Supply of labour Labour supply to an occupation depends on the wage, working conditions, job satisfaction, required qualifications and training, and the size of the working population, including migration.
- Elasticity Labour demand is more elastic when wages are a large share of costs and capital can easily replace workers. Labour supply is more inelastic when long training or rare skills are needed.
- Wage differentials Pay differs because of skill and qualification levels, productivity, union bargaining power, discrimination, regional differences in demand and living costs, and compensating differentials for dangerous or unpleasant work.
- Wages in Wales Average earnings in Wales are below the UK average, partly because of an industrial structure with more lower paid sectors, fewer high paying financial and business service jobs, and a larger share of public sector and part time employment.
- Minimum wages A national minimum wage above equilibrium may cause excess supply of labour, but the effect is small if labour demand is inelastic. A regional minimum wage for Wales could reflect lower Welsh living costs and protect jobs, but could widen pay gaps and encourage workers to leave.
- Flexibility and migration Labour market flexibility depends on union power, regulation, welfare payments and income tax rates. Migration increases labour supply, can fill skills gaps and raise output, and may affect wages in some sectors.
Common mistakes in Demand and Supply in Labour Markets
- Using marginal revenue product theory. WJEC states it is not required; explain labour demand as a derived demand with clear shifts.
- Drawing a minimum wage below the equilibrium wage. A minimum wage only has an effect if set above equilibrium.
- Explaining lower Welsh wages only by workers being less skilled. Industrial structure, the mix of jobs and regional demand are just as important.
- Ignoring elasticity when predicting job losses. The more inelastic labour demand is, the smaller the fall in employment.
- Assuming flexibility is entirely positive. Flexible markets can reduce job security and training by employers.
Try three Demand and Supply in Labour Markets exam-style questions
1. Explain one reason why the supply of qualified doctors is price inelastic. (2 marks)
Show the mark scheme answer
Becoming a doctor requires many years of training; so supply cannot increase quickly when wages rise.
2. Using a diagram, explain the likely effect on a labour market of an increase in migration into the UK. (4 marks)
Show the mark scheme answer
Migration increases the number of workers available; supply of labour shifts right; equilibrium wage falls and employment rises; correct diagram with wage rate and quantity of labour axes; effect may be offset if migrants also raise demand for goods and services.
3. Evaluate the case for a regional minimum wage for Wales. (10 marks)
Show the mark scheme answer
A strong answer would explain that lower living costs and lower average productivity in Wales mean a UK wide rate may cost more jobs here; a lower Welsh rate might protect employment and attract firms; evaluate that it could widen the pay gap with England, encourage skilled workers to leave, reduce living standards and be politically difficult; reach a judgement depending on elasticity of labour demand in Welsh sectors.
Demand and Supply in Labour Markets FAQs
What does WJEC A Level Economics Demand and Supply in Labour Markets cover?
It covers wage determination, the demand for and supply of labour and their elasticities, wage differentials, wages in Wales compared with the UK, labour market flexibility, minimum wages and migration.
Which unit is Demand and Supply in Labour Markets examined in?
It is AS content, so it is examined in AS Unit 1 (Introduction to Economic Principles) and AS Unit 2 (Economics in Action). A2 Unit 4 assesses all A level content, so it can be drawn on again there.
What Welsh context do I need for labour markets?
Be ready to compare wages in Wales with the rest of the UK and explain the reasons, and to evaluate whether Wales should have its own regional minimum wage.
