Supply of Labour

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 fewer hours. 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

For example, the number of qualified Accountants is low, therefore supply is quite inelastic.

  1. Difficulty of getting qualifications:

If it is difficult to get some qualifications therefore supply will be inelastic

  1. The non-wage benefits of a job

Unpleasant jobs will have less people willing to do them therefore supply will be relatively lower. Although many unpleasant jobs may also be low skilled so will still be low paid.

  1. The wages and conditions of other jobs