Supply of Labour

• Higher wages usually will encourage a worker to supply more labour because work is more attractive compared to leisure
• Therefore the Supply curve for Labour tends to be upwardly sloping

 

Substitution effect of a rise in wages:

Workers will tend to substitute income for leisure as leisure now has a higher opportunity cost. This effect leads to more hours being worked as wages rise

Income effect of a rise in wages:

This occurs when an increase in wages causes workers to work harder. This is because workers can get a higher income by working less hours. Therefore they may work less

 

Market Supply of Labour:

Supply of Labour depends upon:

1. The number of qualified people

The number of qualified Accountants is low therefore supply is quite inelastic.

2. Difficulty of getting qualifications:

It is difficult to get some qualifications therefore supply will be inelastic

3. The non-wage benefits of a job

Unpleasant jobs will have less people willing to do them therefore supply will be lower

4. The wages and conditions of other jobs