i)

Frictional Unemployment The function of labour market is to match available jobs with available workers. If all jobs and workers were the same, or if the set of jobs and workers were static and unchanging, this matching process would be quick and easy. But the real world is more complicated. In practice, both jobs and workers are highly heterogeneous (non-uniform).

Jobs differ in their locations, in the skills they require, in the working conditions and hours, and in many other ways. Workers differ in their career aspirations, their skills and experience, their preferred working hours, their willingness to travel, etc.

The real labour market is also dynamic or constantly changing and evolving. On the demand side of the labour market, technological advances, globalizations and changing consumer tasks spur the creation of new products, new firms and even new industries; while outmoded products, firms and industries disappear. As a

result, new jobs are constantly being created, while some old jobs cease to be viable. The workforce in a modern economy is equally dynamic. People move, gain new skills, leave the labour force for a time to rear children or go back to school, and even change careers.

Because the labour market is heterogeneous and dynamic, the process of matching jobs with workers takes time. Short term unemployment that is associated with the process of matching workers with jobs is called frictional unemployment. The costs of frictional unemployment are low and may even be negative; that is frictional unemployment may be economically beneficial. First, frictional unemployment is short-term, so its psychological effects and direct economic losses are minimal. Second, the search process leads to a better match between workers and jobs, a period of frictional unemployment is actually productive, in the sense that it leads to higher output