Question

Explain why workers in the gig economy (such as Uber drivers) are likely to earn less economic rents than traditional employees.b)Explain how the existence of more and more workers in the gig economy might potentially impact the employment conditions of traditional employees.

Note:

You are expected to draw a labour

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discipline model and refer to it

to support your

answer

s. This must be your work and should not be copy

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and

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pasted from another so

urce.

It will likely be easiest to hand

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draw it and scan/photo it in to your document, and this will

be suitable practice for the exam.

Answer 1

a) Economic rent is the extra returns , rewards or revenue generated from factor of production( such as land, capital , labor) from its present use. The owner of the firm would be able to receive additional revenue from its factors of production such as capital or labor , since they are inelastic in supply. This is for Traditional labor market. Whereas , for Gig economy ( Uber drivers) they have elastic supply i.e ) highly sensitive to  price changes. Therefore we can conclude that , Workers in the gig economy (such as Uber drivers) are likely to earn less economic rents than traditional employees.

b) The existence of more and more workers in the gig economy might potentially impact the employment conditions of traditional employees. When more workers moves to Gig economy, the supply of labors in Traditional labor market falls.

As per the below figure the labor market equilibrium was established at the point where Demand for labor curve meets Supply of labor curve at Point E. at W rate of wages and Q number of labors. When the supply of labor falls ( shifts leftwards) from SL to SL1, causing a new equilibrium point E1, resulting in increase in wage rate to W1 and decrease in number of labors to Q1.