Theory question 109
Labour MarketSection B (answer four questions only from this section)
(a) What is unemployment?
(b) Explain any three types of unemployment.
Show the model answer
(a) Unemployment is a situation in which people who are able and willing to work at the current wage cannot find jobs.
(b) Any three, explained:
Frictional: short-term unemployment while workers move between jobs or lack information about vacancies.
Structural: caused by long-term changes in the structure of the economy or technology, e.g. machines replacing workers or a declining industry.
Cyclical: caused by a general fall in demand during a depression or recession in the trade cycle.
Seasonal: caused by seasonal changes in demand or weather, e.g. farm workers in the dry season.
Disguised: more workers are employed than needed, so the marginal product of some is zero.
Residual: people who are unemployable through physical or mental disability.
Define each type and give its cause or an example.