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5.1 Application of Supply and Demand - Labor Force
5.1 Application of Supply and Demand - Labor Force
5.1 Application of Supply and Demand - Labor Force
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CUSTOMERS
In economics the market may refer to the structure where the firm belong. In other disciplines, the word
“market” refers to the types of customer and their number as well
Knowing and understanding your customers are essential to identify the service or good to present to the
market.
Demographics play an important role in knowing your customers. It describe the kind of customers
you have in terms of gender, age and income.
Geographic segment refers to consumers belonging to a certain place. They can be classified as
urban or rural areas, western, eastern, southern and northern parts of a certain country or region,
and it may also refers to different provinces or cities.
SUPPLIER
COMPETITORS SUBSTITUTES
There are three types of competitors
Are goods that can replace other
Competitors have the same qualities and goods because of similarities,
characteristics appearance, use, among others.
Competitive advantage
Colluding
LABOR SUPPLY AND LABOR DEMAND
Labor Supply - Is comprised of the available labor force who are willing
and able to work, and are waiting deployment.
Labor Demand - Refers to the industry’s total available job vacancies from
the previous cycle or year up to the present.
LABOR SUPPLY AND POPULATION GROWTH
Labor force refers to the total number of people identified as employed and unemployed.
The term employed represents those individuals who have a job in either full-time or part-time capacity.
The term unemployed, on the other hand, refers to the people who are presently searching for a job;
workers who are temporarily laid off but are waiting to be called for a job, and applicants who are about
to start a new job.
Finally, underemployed describes those workers who are better skilled than what their current jobs
require. Underemployment happens when there is a mismatch in skills and capabilities or there is over
qualification. A civil engineer doing manual construction is an example of underemployment.
Population Growth is the increase in the total number of human beings in the country.
A census, or the official collection of population information, is locally conducted once every five years buy
Philippine Statistics Authority (PSA).
How does population growth affect the labor force?
An increase in population potentially increases the labor supply. However, the impact of
population growth largely depends on the increase in the number of population.
LABOR FORCE PARTICIPATION RATE EQUATION
𝐿𝑎𝑏𝑜𝑟 𝐹𝑜𝑟𝑐𝑒
Labor Force Participation Rate = x 100
𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐴𝑔𝑒 𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛
Full employment is another macroeconomic goal of a nation. In reality however there are imbalances
in the economy (also known as market failures) that makes it impossible to achieve a state of zero
unemployment.
The unemployment rate measures the percentage of individuals in the labor force who do not have a
job. It is calculated using the equation below:
𝑈𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡
Unemployment Rate = x 100
𝐿𝑎𝑏𝑜𝑟 𝐹𝑜𝑟𝑐𝑒
FOUR TYPES OF UNEMPLOYMENT
Frictional unemployment, which is temporary unemployment that is a result of people having
in between jobs or being in transition.
Cyclical unemployment is caused by the upturn and downturn in the business cycle.
Seasonal unemployment, which happens in industries with peak and lean seasons. Examples
would be tourism and farming. The peak season for most beach destinations in the country is in the
summer during which time, there is a higher demand of workers in businesses such as hotels, travel
and restaurant in the tourist areas.
FACTOR INCOME
Just as business earn profit in exchange for goods and services, factors of production earn what is
called as factor income. The factor income is a labor wage.
Wage is what a worker gets as compensation for hours of labor. In the Philippines, employees are
paid in salaries instead of wages.
The difference between wages and salaries is that wage measures the hourly or daily rate, salary
refers to aggregate amount received.
Minimum Wage is the least possible amount firms must pay their employees as mandated by the
country’s labor laws. Minimum wage in the Philippines varies per region and across sectors.
The Department of Labor and Employment (DOLE) is responsible for the setup and regular review of
minimum wages in the Philippines.
LABOR MIGRATION AND OVERSEAS FILIPINO WORKERS (OFW)
Labor policies in the Philippines are governed by the labor code implemented by
government agencies such as DOLE for locally employed individuals and the
Philippine Overseas employment Administration (POEA) for OFWs
𝐿𝑎𝑏𝑜𝑟 𝐹𝑜𝑟𝑐𝑒
Labor Force Participation Rate = x 100
𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐴𝑔𝑒 𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛
𝑈𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡
Unemployment Rate = x 100
𝐿𝑎𝑏𝑜𝑟 𝐹𝑜𝑟𝑐𝑒
EXERCISE
Use the given data calculate the labor force, employment rate, and labor force participation rate.
Given: Employment individuals = 35 800 000
Unemployment individuals = 8 500 000
Working age population = 50 000 000
Use the given data calculate the labor force, employment rate, and labor force participation rate.
Given: Employment individuals = 43 287 000
Unemployment individuals = 9 500 000
Working age population = 55 300 000
Use the given data calculate the labor force, employment rate, and labor force participation rate.
Given: Employment individuals = 43 287 000
Unemployment individuals = 9 500 000
Working age population = 55 300 000