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Economics

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Elasticity of Labour Supply (Labour Markets)

Level:
AS, A Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Elasticity of labour supply measures the extent to which labour supply responds to a change in the wage rate in a given time period

Wage elasticity of labour supply

  • The wage elasticity of supply of labour is the sensitivity of the supply of labour to a change in the wage rate.
  • This is affected by the specific skills and educational requirements: the more complicated the skills and the higher, or longer to achieve, the qualifications required, the more inelastic the supply.
  • If the role has a significant vocational aspect, such as nursing, individuals are less sensitive to changes in pay making the supply more elastic.
  • The time period under consideration is also a factor affecting the supply: in the short run, the supply curve of labour tends to be inelastic as it takes time for people to respond to changes in relative wages.

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