Labour

Traps in Labour

• Picks a closely related concept
  Learn related terms as contrasting pairs with one-line definitions, and identify which one the stem describes.
• Labour market misconceptions
  Wages are influenced by demand and supply of labour, trade union bargaining, minimum wage laws and productivity. Unemployment types: frictional, structural, cyclical, seasonal.
• Reverses the direction of the effect
  Trace the chain step by step (e.g. buying securities → banks gain cash → money supply rises) and check the sign at every link.
• Chooses a true but irrelevant statement
  Re-read the question's key term and test each option against it, not against whether it is true in general.
• Uses the everyday meaning of a term
  Economic terms have precise definitions. Recall the textbook definition before matching.
• Stops at a different economic quantity
  Underline what the question asks for and check the final number is THAT quantity, not a step on the way.
• Misunderstands types and measurement of unemployment
  Unemployment rate = unemployed/labour force × 100 (labour force = employed + unemployed). Frictional: between jobs. Structural: mismatch of skills/industries. Cyclical: lack of aggregate demand. Seasonal: varies with seasons.
• Uses the wrong base in a ratio
  Percentage change = change ÷ ORIGINAL value. Unemployment rate = unemployed ÷ LABOUR FORCE (employed + unemployed). Write the base before dividing.
• Over-generalises a rule
  Economic laws hold 'other things being equal' and within limits. Be suspicious of options with always/never/all.
• Misreads price ceilings and floors
  A maximum price set BELOW equilibrium causes shortage (black markets); a minimum price ABOVE equilibrium causes surplus.
• Applies the rule for the opposite case
  Before answering, name the case in the stem (inelastic? price floor ABOVE equilibrium? point INSIDE the PPC?) and recall the rule for that case only.