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F583 - Economics of Work and Leisure - June 2014 watch

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    (Original post by Pro Crastination)
    Trade unions may be monopolies or oligopolies.

    Trade unions are labour organisations that seek to promote the interests of their members by negotiating wages and working conditions on their members' behalf. By doing so, they make use of collective bargaining, which is more probable to ensure wage rises/improvements in working conditions, as opposed to individual employees negotiating for themselves - as such employees may lack persuasive skills, or may, on their own, not disrupt the production process by much if they were to strike.

    Trade union power is determined by:
    • Proportion of workers for a firm who are members of that union.
    • Available funds.
    • Public support.
    • Degree of disruption industrial action creates.
    • Lower the rate of unemployment.
    • Degree to which legislation favours unions over employers.


    Why trade unions are a market failure:



    They may cause unemployment by taking advantage of their bargaining power to artificially push wages up. This pushes wages up from W to W1, which creates a disequilibrium in the labour market (otherwise known as a labour market failure). When this occurs, the quantity of labour employed decreases from Q to Q1, which creates additional unemployment. (You could also argue that they shift the supply curve left by forcing employers to require higher qualifications.)

    Solutions:
    1. Toughen anti-union legislation.
    2. Strengthening employers' powers by reducing competition legislation - if companies gain labour market share, they will have a larger power to influence the wage rate.
    3. Trade unions themselves can create productivity agreements - whereby, the employer would agree to raise the wage rate, so long as workers train and improve their skills. Because of this gain of skills, the demand for this labour will increase, as their MRP would have increased due to higher productivity - so it will simply be a shift right in the demand curve for labour - raising wages and not creating unemployment.


    Thank you! This has been very helpful. Am I correct in saying that on your first diagram of the effect of a trade union on unemployment, that in addition to the unemployment created through the contraction in demand, would unemployment increase further due to the extension of supply (as more people are willing to work at the new wage rate)? Is what I've drawn on the diagram correct? Thanks Name:  diagram.jpg
Views: 825
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    (Original post by Fas)
    oh right, didn't know that haha, i just assumed they could throw in anything there. In that case, i'd much rather data response be on the harder trade union/monopsony stuff, and the essay on leisure markets
    Haha yeah, I was slightly upset at this news.

    Nonetheless, I'm expecting it to be a much harder paper considering many people were happy with the F585...
    I'm going to settle with diagrams, Leisure Markets tonight (taking it easy today, way too much maths revision) then move onto papers tomorrow evening hopefully.

    How many papers have you done btw? If so do you know of any "comment on" points which are easy to gain marks on. Say for F581 we have the whole 'business relevance' 'elasticity' 'magnitude' comment on marks; what can possibly to do get the same for F583??
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    (Original post by Qwerty Pies)
    Thank you! This has been very helpful. Am I correct in saying that on your first diagram of the effect of a trade union on unemployment, that in addition to the unemployment created through the contraction in demand, would unemployment increase further due to the extension of supply (as more people are willing to work at the new wage rate)? Is what I've drawn on the diagram correct? Thanks Name:  diagram.jpg
Views: 825
Size:  415.7 KB
    Effectively, yes. I believe I had this discussion with one of my teachers. They told me that if I specifically worded it, I can get away with either.
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    Which leisure market do you tend to do? I always use airlines because you tend to be able to cover all market structures.


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    (Original post by Qwerty Pies)
    Thank you! This has been very helpful. Am I correct in saying that on your first diagram of the effect of a trade union on unemployment, that in addition to the unemployment created through the contraction in demand, would unemployment increase further due to the extension of supply (as more people are willing to work at the new wage rate)? Is what I've drawn on the diagram correct? Thanks Name:  diagram.jpg
Views: 825
Size:  415.7 KB
    I believe you're supposed to refer to that as 'surplus labour' because the only unemployment caused is falling from the equilibrium quanitity. At the higher wage, more workers are attracted and therefore supply themselves. But I'm not sure if they actually contribute to unemployment. I got told to stick to the first explanation


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    (Original post by Pro Crastination)
    Trade unions may be monopolies or oligopolies.

    Trade unions are labour organisations that seek to promote the interests of their members by negotiating wages and working conditions on their members' behalf. By doing so, they make use of collective bargaining, which is more probable to ensure wage rises/improvements in working conditions, as opposed to individual employees negotiating for themselves - as such employees may lack persuasive skills, or may, on their own, not disrupt the production process by much if they were to strike.

    Trade union power is determined by:
    • Proportion of workers for a firm who are members of that union.
    • Available funds.
    • Public support.
    • Degree of disruption industrial action creates.
    • Lower the rate of unemployment.
    • Degree to which legislation favours unions over employers.


    Why trade unions are a market failure:



    They may cause unemployment by taking advantage of their bargaining power to artificially push wages up. This pushes wages up from W to W1, which creates a disequilibrium in the labour market (otherwise known as a labour market failure). When this occurs, the quantity of labour employed decreases from Q to Q1, which creates additional unemployment. (You could also argue that they shift the supply curve left by forcing employers to require higher qualifications.)

    Solutions:
    1. Toughen anti-union legislation.
    2. Strengthening employers' powers by reducing competition legislation - if companies gain labour market share, they will have a larger power to influence the wage rate.
    3. Trade unions themselves can create productivity agreements - whereby, the employer would agree to raise the wage rate, so long as workers train and improve their skills. Because of this gain of skills, the demand for this labour will increase, as their MRP would have increased due to higher productivity - so it will simply be a shift right in the demand curve for labour - raising wages and not creating unemployment.


    ---

    Monopsony: a single buyer in a market. As the chapter is labour market failure, it's usually about a single buyer of labour: such as the NHS for nurses.

    The monopsony's bargaining power can also be determined by the determinants listed above.

    As profit maximisers (you may want to think about a private sector monopoly in this case, maybe supermarkets and checkout assistants or something), firms will employ workers up to the point where their MCL (wage rate), is equal to the MRP they bring in for the company. This can be displayed using a diagram:



    As the monopsony is the only employer of this labour, labour units (how highly impersonal) know that they have no where else to look for employment, and so are effectively powerless in determining their wages. Thus, employers can pay an average wage of w (in the diagram), employing Q employees (employing up until MRP=MCL to profit maximise).

    This is a market failure (I'm a little unsure here) as the amount of money labour units command for their efforts is lower than the equilibrium wage if there was perfect competition in the labour market.

    Solutions
    • Enforcing more competition by enforcing tougher competition rules - whatever they are.
    • If it's the government, a solution would be privatisation.
    • Increasing the national minimum wage (only if the new NMW is higher than the wage currently paid to these employees).




    If a NMW is applied that is above the wage the employees currently earn, then it will lead to an increase in both the wage rate (from W to W1) and the number of individuals employed - which would be more reflective of the labour market equilibrium in perfect competition.

    ---------

    A bilateral monopoly can also exist. This is where there is a single supplier of labour and a single buyer. For instance, state school teachers and teaching unions. In this situation, this diagram can be used:



    The wage will be somewhere between W and W1, depending upon the relative bargaining strength of the firm and the union. If, for instance, the union has a large degree of public sympathy for its efforts in striking, the firm might wish to concede and raise wages for fear of losing sales. This would lend the union more power, which would mean that the wage would likely be nearer to W1 than W. The wage will never increase above W1 because the firm would then no longer be employing up to the point where MRP=MCL (so it wouldn't be profit maximising).

    ---

    So yeah, that's what I know about the two. I don't know if I have enough analytical points for a 15 marker on, say, why a trade union causes market failure. Unless I can stretch out the explanation of how they have power to determine wages in the first place, the actual analysis seems fairly simplistic.
    oh you beauty, that's very helpful! cheers
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    (Original post by Kuchkuchhotahai)
    I believe so too, and woah.. Wait I've always been told that Leisure markets can only come up once? Either as Data response and then questions on Labour Markets OR Labour Market Data response, 2 Labour Market questions and then 1 Leisure Markets question... By questions I mean essays.
    What's data response? Sorry my teacher has deprived us of basic knowledge, like in F585 I wouldn't have known that the first 4,610 markers would be on extract 1&2 and second batch of questions is on extract 3&4 and the last question is on the last extract , so can anyone tell me the structure of this please?
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    (Original post by Kuchkuchhotahai)
    Haha yeah, I was slightly upset at this news.

    Nonetheless, I'm expecting it to be a much harder paper considering many people were happy with the F585...
    I'm going to settle with diagrams, Leisure Markets tonight (taking it easy today, way too much maths revision) then move onto papers tomorrow evening hopefully.

    How many papers have you done btw? If so do you know of any "comment on" points which are easy to gain marks on. Say for F581 we have the whole 'business relevance' 'elasticity' 'magnitude' comment on marks; what can possibly to do get the same for F583??
    yeah that's what i reckon aswell, i don't think it'll be too hard but still harder than standard. haha im gonna have to start f583 work tomorrow, spent all of today absolutely cramming for M1 which is gonna be a bloodbath of the finest.

    ive done quite a few, can't remember how many, but im gonna be doing them again as its been a fair while since i did them, and like do them in timed conditions and send them to my teacher for marking, doing it properly haha that's a problem for me too, i don;t think there are any generic comment marks cos it differs depending on what the question is, although i guess the usual "it depends on" is a good failsafe option if you can't think of anything else
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    (Original post by ASKid)
    What's data response? Sorry my teacher has deprived us of basic knowledge, like in F585 I wouldn't have known that the first 4,610 markers would be on extract 1&2 and second batch of questions is on extract 3&4 and the last question is on the last extract , so can anyone tell me the structure of this please?
    basically, there'll be a case study at the front of the exam, and the first 25 marks will be based upon that case study (a bit like F581 and F582 were done) then the remaining 35 marks will be the 15 mark and 20 mark essay (you get a choice of 3 of these)
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    (Original post by Pro Crastination)
    Trade unions may be monopolies or oligopolies.

    Trade unions are labour organisations that seek to promote the interests of their members by negotiating wages and working conditions on their members' behalf. By doing so, they make use of collective bargaining, which is more probable to ensure wage rises/improvements in working conditions, as opposed to individual employees negotiating for themselves - as such employees may lack persuasive skills, or may, on their own, not disrupt the production process by much if they were to strike.

    Trade union power is determined by:
    • Proportion of workers for a firm who are members of that union.
    • Available funds.
    • Public support.
    • Degree of disruption industrial action creates.
    • Lower the rate of unemployment.
    • Degree to which legislation favours unions over employers.


    Why trade unions are a market failure:



    They may cause unemployment by taking advantage of their bargaining power to artificially push wages up. This pushes wages up from W to W1, which creates a disequilibrium in the labour market (otherwise known as a labour market failure). When this occurs, the quantity of labour employed decreases from Q to Q1, which creates additional unemployment. (You could also argue that they shift the supply curve left by forcing employers to require higher qualifications.)

    Solutions:
    1. Toughen anti-union legislation.
    2. Strengthening employers' powers by reducing competition legislation - if companies gain labour market share, they will have a larger power to influence the wage rate.
    3. Trade unions themselves can create productivity agreements - whereby, the employer would agree to raise the wage rate, so long as workers train and improve their skills. Because of this gain of skills, the demand for this labour will increase, as their MRP would have increased due to higher productivity - so it will simply be a shift right in the demand curve for labour - raising wages and not creating unemployment.


    ---

    Monopsony: a single buyer in a market. As the chapter is labour market failure, it's usually about a single buyer of labour: such as the NHS for nurses.

    The monopsony's bargaining power can also be determined by the determinants listed above.

    As profit maximisers (you may want to think about a private sector monopoly in this case, maybe supermarkets and checkout assistants or something), firms will employ workers up to the point where their MCL (wage rate), is equal to the MRP they bring in for the company. This can be displayed using a diagram:



    As the monopsony is the only employer of this labour, labour units (how highly impersonal) know that they have no where else to look for employment, and so are effectively powerless in determining their wages. Thus, employers can pay an average wage of w (in the diagram), employing Q employees (employing up until MRP=MCL to profit maximise).

    This is a market failure (I'm a little unsure here) as the amount of money labour units command for their efforts is lower than the equilibrium wage if there was perfect competition in the labour market.

    Solutions
    • Enforcing more competition by enforcing tougher competition rules - whatever they are.
    • If it's the government, a solution would be privatisation.
    • Increasing the national minimum wage (only if the new NMW is higher than the wage currently paid to these employees).




    If a NMW is applied that is above the wage the employees currently earn, then it will lead to an increase in both the wage rate (from W to W1) and the number of individuals employed - which would be more reflective of the labour market equilibrium in perfect competition.

    ---------

    A bilateral monopoly can also exist. This is where there is a single supplier of labour and a single buyer. For instance, state school teachers and teaching unions. In this situation, this diagram can be used:



    The wage will be somewhere between W and W1, depending upon the relative bargaining strength of the firm and the union. If, for instance, the union has a large degree of public sympathy for its efforts in striking, the firm might wish to concede and raise wages for fear of losing sales. This would lend the union more power, which would mean that the wage would likely be nearer to W1 than W. The wage will never increase above W1 because the firm would then no longer be employing up to the point where MRP=MCL (so it wouldn't be profit maximising).

    ---

    So yeah, that's what I know about the two. I don't know if I have enough analytical points for a 15 marker on, say, why a trade union causes market failure. Unless I can stretch out the explanation of how they have power to determine wages in the first place, the actual analysis seems fairly simplistic.

    thanks for this!
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    (Original post by ASKid)
    What's data response? Sorry my teacher has deprived us of basic knowledge, like in F585 I wouldn't have known that the first 4,610 markers would be on extract 1&2 and second batch of questions is on extract 3&4 and the last question is on the last extract , so can anyone tell me the structure of this please?
    Hope Fas has cleared everything up for you, just be aware that Cinemas is a leisure market which hasn't come up before.. Do some reading around Oligopolies and in particular the big cinema chains.
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    (Original post by Fas)
    yeah that's what i reckon aswell, i don't think it'll be too hard but still harder than standard. haha im gonna have to start f583 work tomorrow, spent all of today absolutely cramming for M1 which is gonna be a bloodbath of the finest.

    ive done quite a few, can't remember how many, but im gonna be doing them again as its been a fair while since i did them, and like do them in timed conditions and send them to my teacher for marking, doing it properly haha that's a problem for me too, i don;t think there are any generic comment marks cos it differs depending on what the question is, although i guess the usual "it depends on" is a good failsafe option if you can't think of anything else
    Oh my.. Tell me about it.. I'm in similar stance with S1 and C4, literally need to cram revise.

    Oh fair enough, so what do you think the leisure market could possibly be - if it does come up in data response? Cinemas? Something random like Football again? (this would be an interesting one to discuss)
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    (Original post by Fas)
    basically, there'll be a case study at the front of the exam, and the first 25 marks will be based upon that case study (a bit like F581 and F582 were done) then the remaining 35 marks will be the 15 mark and 20 mark essay (you get a choice of 3 of these)

    Oh right thank you! So you guys refer to the case study as data response? How would you structure the 15 and 20 mark essay and do you have any general tips? Predictions? Or is it hard to make predictions about f583 unlike F585?
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    Could anyone explain how I would write an essay on how inequality is measured and the causes... very confused, thanks
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    (Original post by Pro Crastination)
    Here.
    Do you have the mark scheme?
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    (Original post by Waloo)
    Could anyone explain how I would write an essay on how inequality is measured and the causes... very confused, thanks
    for measuing inequality, you would just talk about the Lorenz Curve and the Gini coefficient, and then draw the diagram showing the Lorenz Curve.

    On that regard, im not so sure i fully understand the Lorenz Curve, can anyone explain it?
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    (Original post by Fas)
    for measuing inequality, you would just talk about the Lorenz Curve and the Gini coefficient, and then draw the diagram showing the Lorenz Curve.

    On that regard, im not so sure i fully understand the Lorenz Curve, can anyone explain it?
    In the diagram, there is a 45° line, this line represents perfect income equality. That is when 10% of the population earn 10% of total income, 30% of population earn 30% of total income and so on. The actual state of income shares is the line below that "perfect equality" line. I'm using the diagram in the text book, so as you can see, the bottom 20% of the population earn approximately 5% total income. 80% of population earn 50%, 100% earn 100%, this shows that the top 20% of the population earn up to 50% total income. => income inequality.

    I hope it makes sense.

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    (Original post by Waloo)
    Do you have the mark scheme?
    Yes.
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    I've uploaded some quick labour market revision presentations here if they are of use to anyone:

    https://www.dropbox.com/sh/s7m1l9lcy...0Presentations
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    Any ideas what the section B questions might be?
 
 
 

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