1. Define a corner solution in the labour market, and discuss fully with aid of well labelled graphs how the corner solution arises and how it will help in understanding the decision by individuals whether to work or not work. [13]

Draw a fully labelled graph with corner solution, indicating the reservation and real wage. Compares these positions and how the individual decides to work or not to work.

2. Differentiate between real wage and reservation wage and illustrate on graphs. [7]
3. Explain, with the aid of a figure, how the labour supply of a person would change if the initially offered wage is above the reservation wage, but then it drops to exactly the same as the reservation wage, and eventually becomes lower than the reservation wage. [9]
4. Explain clearly how a change in wage rate will result in a backward-bending individual labour supply curve. Distinguish clearly the difference between income and substitution effects. [15]

You need to explain the combined outcome of income and substitution effects. Provide an illustration of the backward bending supply curve, labelling is important. Indicate which effect explains the upward/backward bending slopes.

5. Define the labour force participation rate (LFPR), highlighting the various reasons as to why the female LFPR has witnessed a sharp increase in recent decades. [15]
6. Briefly describe the benefits and costs of migration of labour to both countries of origin and countries of destination, referring to the impact of labour migration on the South African labour market. [15]

Students need to explain benefits and costs arising to both origin and destination countries and can refer to the impact on the supply of labour, particularly high-level personnel, in South Africa. Refer to Barker (2007) chapter 2.

7. Name and briefly describe five consequences HIV/AIDS had and will have on the South African labour market and economy. [10]

What has happened to the labour force participation rate of women in South Africa in recent years and what are some possible reasons for this development? [10]

8. In South Africa, there are several forms of welfare schemes. Discuss with clear diagrammatic illustration(s) the effect of such schemes on labour supply by individuals. [25]

What is non-labour income? Explain and illustrate how the presence of non-labour income impacts the trade-off between leisure and work hours. Illustrate and discuss how non-labour income increases utility as income increases without limiting leisure hours or increasing work hours.

10. Citing relevant examples, discuss the effect of non labour income on individual labour supply decision making process. [15]

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