3.5.2 Supply of labour

• What does the labour supply refer to?

  Workers willing to work
• The labour supply increases when the wage rate rises
• How does an increase in wage rates affect the labour supply?

  Increases the labour supply
• A larger population size generally leads to a larger workforce
• The proportion of the population willing and able to work at the given wage rate affects the labour supply.
• What happens to the labour supply if wage rates in a town rise significantly?

  Increases
• Match the factor affecting labour supply with its explanation:

  Wage Rate ↔️ Higher wages attract more workers

  Population Size ↔️ Larger population means more potential workers

  Participation Rates ↔️ Proportion of population willing to work
• The elasticity of labour supply measures the responsiveness of labour supplied to changes in the wage
• What is the formula for calculating the elasticity of labour supply?

  E_{s} = \frac{\% \text{ change \in quantity of labour supplied}}{\% \text{ change \in wage rate}}</latex>
• Match the type of elasticity with its responsiveness to wage changes:

  Elastic ↔️ Highly responsive

  Inelastic ↔️ Slightly responsive

  Unit Elastic ↔️ Proportional response
• Stable industries typically have a lower elasticity of labour supply
• What is the value of elasticity for an elastic labour supply?

  Greater than 1