Leaving Cert Economics Labour Market: (a) (i) Define labour as a fact

Question

(a) (i) Define labour as a factor of production.

Labour refers to the human effort—both physical and mental—used in the production of goods and services. It encompasses the skills, expertise, and work hours that individuals contribute to an organization, directly affecting productivity and output.

(ii) State and explain TWO reasons why different wage rates are paid for different jobs.

1. **Different Skills**: Different jobs require varying levels of skill and expertise. Typically, more specialized skills command higher wages. For example, a doctor who has undergone extensive training will earn more compared to an unskilled laborer.

2. **Training and Education**: Jobs that necessitate higher education or vocational training often offer higher wages. For instance, professionals with degrees or certifications generally receive better compensation due to their qualifications and the investments made in their education.

(iii) State and explain ONE development which might result in a firm reducing the number of workers it employs at present.

**Demand for Pay Increases**: If market conditions lead to increased pay demands from workers, the firm may face escalating labor costs. To maintain profitability, the firm might reduce its workforce or automate processes, resulting in fewer employees.

(b) The diagram below represents the supply of labour by a particular individual. From point A to point B this individual is prepared to work more hours as the wage rate per hour increases.

(i) Explain how this individual reacts to further wage increases from point B to point C. Give ONE reason why this may occur.

As wage rates increase from point B to point C, the individual may choose not to work more hours due to decreased willingness. One reason could be leisure: the individual may prefer to allocate more time to personal activities than to work, leading to a decrease in the number of hours worked despite higher wages.

(ii) In addition to wages an employer may offer employees benefits-in-kind. Explain the underlined term and give TWO examples of benefits-in-kind.

**Benefits-in-Kind**: These are non-monetary benefits provided to employees as part of their compensation packages. Examples include:
1. Use of a company car.
2. Payment towards health insurance.

(c) The minimum wage paid to workers in Ireland was increased in 2005 to €7.65. Explain the possible effects which this increase could have on each of the following:

1. **The supply of labour**: The supply of labour will increase, as higher wages attract more individuals to the workforce seeking better rewards.

2. **The demand for labour by individual firms**: This may possibly fall in certain sectors as businesses may face increased operational costs, potentially reducing their workforce or limiting hiring.

3. **The rate of inflation in Ireland**: The rate of inflation might increase due to higher wage costs being passed onto consumers, leading to higher prices for goods and services overall.

(a) (i) Define labour as a factor of production - Leaving Cert Economics - Question 4 - 2006

Worked Solution & Example Answer:(a) (i) Define labour as a factor of production - Leaving Cert Economics - Question 4 - 2006

Define labour as a factor of production.

State and explain TWO reasons why different wage rates are paid for different jobs.

State and explain ONE development which might result in a firm reducing the number of workers it employs at present.

Explain how this individual reacts to further wage increases from point B to point C.

In addition to wages an employer may offer employees benefits-in-kind. Explain the underlined term and give TWO examples of benefits-in-kind.

Explain the possible effects which this increase could have on the following: The supply of labour.

Explain the possible effects which this increase could have on the following: The demand for labour by individual firms.

Explain the possible effects which this increase could have on the following: The rate of inflation in Ireland.

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