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GCSE Economics Coursework- Determination of Wages.

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Introduction

Daniel Sieradzan GCSE Economics Coursework- Determination of Wages For my Economics GCSE coursework I have decided to investigate how the wages of workers are determined. But first I need to ask the question, what are wages? From the knowledge that I have gained, wages are the reward for the labour people provide. In Economics, we say wages (the price of labour) are determined by demand and supply. There are many factors however, that affect wages and in this coursework I am going to investigate those factors which influence demand and supply. I will present sufficient evidence that will show how are wages determined. To complete this successfully, I will use different sources, such as the internet, economics books, as well as askinf workers in different areas to share some information about the job, as well as the wage they get for it. I collected this information through a wage survey which I carried out as part of my class work. Demand is the amount of labour a firm is willing to buy at a set wage. As we see, the demand line is sloping downwards. When the wage is set at a high level (W1), the demand for workers is low (L1), and firms demand only few workers at that point. Firms will not pay a wage which is greater than the value of the worker to the form. So at a high wage it will only employ those workers which are profitable. This means fewer workers will be employed. When the wage is low (W), many workers will be demanded (L) because the company will be able to pay more workers than at a higher wage. ...read more.

Middle

If wages rise from W to W1, the supply of labour will only rise from Q to Q1. When we look at supply which is elastic, we can see that at W, Q will be supplied. Jobs like this usually don't have any barriers such as qualifications or cost of training for example. If the wage rises from W to W1, the quantity of labour will increase substantially from Q to Q1. The wage rate in a particular industry The wage rate in a particular industry is determined by the supply and demand for labour in the industry. The diagram below shows the wages of highly skilled workers in a expanding economy. High demand coupled with limited and therefore inelastic supply leads to high wages. The graph below shows the wages of unskilled workers in a declining industry. Low demand coupled with a potentially large, elastic supply of labour leads to a low wage rate. In the "real world", wages are not always determined by demand and supply. The government, trade unions and employers associations can interfere with how the price system works. The government supplies wages for the public sector workers and in its fight to keep inflation and taxes down it will try to keep wages low for teachers, nurses etc. In doing so it often sets a wage below the equilibrium. An example of this is with nurses: If the government set the wage at W demand would equal supply, and there would be no shortage of nurses. Their wage has been set at W1 and this has created a shortage of L2-L1, which is currently covered by encouraging nurses to come here from overseas. ...read more.

Conclusion

In Mariah Lane's case, who is an accountant, wages are also influenced by demand and supply however up to a certain limit, since the job is inelastic. Whenever a job appears to be inelastic, there are other factors that affect it, for example like in this case long training for accountancy qualifications, as well as the cost of training that lies behind it, which are the barriers that I have discussed. The shop assistant, Nand Raja doesn't require any qualifications as it is his own private-run business that hardly requires any skills, apart from basic mathematics. This job is very elastic, which means that there won't be many factors other than demand and supply that will interfere. Lastly, Jonathan Stewart, a doctor at the Middlesex hospital, plays an important role. Apart from demand and supply, which are both inelastic, Dr Stewart required an extensively long training course which lasted up to 7 years. It is a job which requires extreme skill and precision, and as I have discussed not many people tend to go for such long training schemes. Dr Stewart tends to stay behind in the hospital for long hours which also boosts his income, however as I said, this job requires a lot of time and effort. After I have looked at the workers that I have interviewed, I have clearly understood that wages are not solely determined by demand and supply. This also brings in the elasticity for the demand and supply of labour which I have covered in this coursework. From this coursework it is also understandable how trade unions influence companies in the wage they set for their members. I have successfully explained how wages are determined and what are the factors that influence this. This coursework has also helped me understand wages even better and expand my knowledge. ...read more.

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