Assignment 1: LASA 2: Supply and Demand in a Global Market
Assignment 1: LASA 2: Supply and Demand in a Global Market Derived demand occur when a demand for a product increases causing a rise in demand for a related good or service. For instance, an increase in demand for wheat causes a corresponding increase in demand for labor. This is a type of demand for a product in a market where the intermediate products also exist. For businesses, this can be a good opportunity for them since the demand for one product leads to increased demand for another related good. Therefore, supplying both products in the market help in maximizing profit. Salaries will be high as a result of the business success. Therefore, demand for labor is usually controlled by the management and they determine the number of employee they are going to have and the number of hours they are supposed to work (Hirschey, 2009). Another example of derived demand is increase in demand for farm products that leads to the demand for fertilizer, which in turn increase labor demand.
From the above presentation, demand for takeaway coffee leads to demand for coffee makers (baristas).
The supply of labor is determined by a number of factors including the changes in income tax, wage rate, female participation in the workforce, government labor regulations, trade unions, migration patterns, benefit reform, changes in the retirement age. Some of the factors which affected labor supply for the last 20 years include technology and globalization (Erosa, Fuster & Kambourov, 2016). These changes have led to minimal job opportunities and laying down of employees to replace them with machines to enhance efficiency and increase productivity. For example, use of Artificial intelligence where Robots have replaced humans and have proved to do more work compared to human employees. Rise in wage inequality has been a primary factor that has changed the supply of labor in the last 20 years. This reduce people’s willingness to work hence affecting labor supply in the economy. The inequa
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