How employment and unemployment may be determined by both demand-side and supply-side factors
Both the overall level of spending in the economy and the behaviour of workers and firms can cause unemployment to rise or fall. Neither side of the economy acts alone.
Real World
After the 2016 Brexit vote, business investment fell (negative demand-side shock), raising cyclical unemployment, while new immigration rules tightened labour supply — a simultaneous supply-side effect on employment.
Exam Focus
Identify whether a factor shifts labour demand or labour supply, then trace the effect on equilibrium employment and wages for full analytical marks.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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