The concept of, and the factors which determine, real wage unemployment
Real wage unemployment happens when wages are stuck above the level that clears the labour market. More workers want jobs at that wage than employers want to hire.
Formula
Labour Surplus = Qs of Labour − Qd of Labour (at wage above equilibrium)
Real World
Critics of the UK's 2016 increase in the National Living Wage argued it created real wage unemployment in sectors like retail, where some employers cut hours or automated tasks rather than pay the higher rate.
Exam Focus
Draw a labour market diagram showing wages above equilibrium and label the resulting surplus — diagram marks are often straightforward and frequently missed.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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