Cambridge International as and a level Economics Ebook

Figure 8.14 
Equilibrium in the labour market
1
Use a diagram to explain the eff ects on the UK 
labour market of:
a
the 
infl ux of migrant workers
b
the return of Polish workers following the 
downturn in the UK economy.
2
Discuss the costs and benefi ts for
a
the UK economy
b
the Polish economy
of labour migration on the scale reported above.
Polish agricultural 
labourers in East Anglia
208
Cambridge International A Level Economics

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the number of workers who are able to produce clothing. 
When this happens, the labour supply curve shift s to 
the right. Th
is surplus labour has a downward eff ect on 
wages, making it more profi table for fi rms producing 
clothing to hire more labour. As the number of workers 
increases, so their marginal physical product falls, as does 
the value of their marginal revenue product. Th
e outcome 
in this case is that wages are reduced for all workers, 
although the level of employment rises. Th
is is shown in 
Figure 8.16
.
Transfer earnings and economic rent in the 
labour market
In our introduction to the labour market we posed the 
question:
Why is it that some people with exceptional talent – 
for example, Lionel Messi, Roger Federer, Maria 
Sharapova, Madonna or Amitabh Bachchan – are so 
highly paid?
Th
e answer to this question can in part be given in the 
same way as to that as to why a teacher is paid more than 
a street cleaner – supply and demand. In order to answer 
why these diff erences in earnings occur, economists fi nd it 
useful to split earnings into two elements:
1 Transfer