BY THE END OF THIS UNIT YOU WILL BE ABLE TO

EXPLAIN THE SHAPE OF THE SUPPLY OF LABOUR CURVE

OUTLINE THE DETERMINATES OF THE SUPPLY OF LABOUR CURVE

USE THE SUPPLY AND DEMAND MODEL TO ILLUSTRATE THE LABOUR MARKET

The Supply Of Labour

Supply of Labour Labour is supplied by households or consumers in

return for wagesThe supply of labour shows the number of workers

who are willing to work at each given wage rate. SL

Q (hours)

W ($/hr) An increase in wages brings about an increase in the quantity supplied for labour a movement along the curve.

W1

Q1

W2

Q2 YF YF = Full employment

Shape of the supply curve

The supply curve slopes upwards from the left to the right. This indicates that as wages rise, more workers are willing to make themselves available for work.

Eventually once all available workers are employed (Yf) the additional increases in the wage rate cannot increase the quantity of labour supplied. Thus the curve becomes vertical.

Shifts of the Labour Supply Curv e

The other factors that affect the supply of labour areChanges in the size of the population ( Net

migration/ rate of natural increase)

Changes in the size of the labour force School leaving age Compulsory retirement age Availability of welfare support Age structure