What does the term 'labour supply' refer to?

The term 'labour supply' refers to the total number of people available to provide labor, which includes both those who are currently employed and those who are unemployed but seeking work. This is crucial in understanding the labour market because it gives a complete picture of how many individuals are willing and able to work at different wage levels.

The inclusion of unemployed individuals in this definition highlights the potential workforce that can be drawn upon by employers when there are job vacancies, as it indicates not just those who are actively working but also those who are currently without jobs but available for work.

In contrast, focusing only on those currently employed would ignore a significant portion of the workforce that could impact employment levels and labor market dynamics. Similarly, considering only job vacancies or the demand for workers would neglect the supply side of the equation, which is essential for understanding the balance of the labor market.