Cambridge International as and a level Economics Ebook

[13]
3
The 
diff erences in wage rates paid in diff erent 
occupations are caused entirely by the diff erences in 
the elasticity of supply of labour. The way, therefore, 
to overcome the diff erences in wage rates is to 
increase the training available to workers. Discuss 
whether economic analysis supports this argument. 
[25]
Source
:
 
Cambridge International AS and A Level Economics 9708 
Paper 41 Q4 October/November 2012.
In this chapter it has been shown that:
■
Governments apply a range of policies to 
correct market failure including indirect 
taxation, subsidies, permits, licences, 
regulations and the recognition of property 
rights.
■
Governments seek to develop policies that 
will improve the distribution of income 
and wealth through benefits, progressive 
taxation and a range of other measures.
■
The demand for labour is a derived 
demand; the firm’s demand curve can be 
determined from the value of the marginal 
revenue product of labour.
■
The supply of labour to a firm depends on 
the wage rate.
■
The wage rate in a market is determined by 
the supply of labour and demand for labour.
■
Transfer earnings and economic rent can be 
used to explain why some workers end up 
being paid more than others.
■
Labour markets can be influenced by 
the actions of trade unions and the 
government.
■
Government failure can occur as a result of 
intervention in markets.
SUMMARY
Chapter 8: Government microeconomic intervention
215

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Chapter 9:
The macroeconomy
A Level
Learning objectives