Economics-A-level-Aqa
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1-economic-methodology-and-the-economic-problem4 主题
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2-individual-economic-decision-making4 主题
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3-price-determination-in-competitive-markets10 主题
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types-of-economic-integration
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protectionist-policies-quotas-and-export-subsidies
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protectionist-policies-tariffs
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protectionist-policies-an-introduction
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the-benefits-and-costs-of-trade
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international-trade
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globalisation
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types-of-supply-side-policies
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an-introduction-to-supply-side-policies
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fiscal-policy-budget-balances-and-national-debt
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types-of-economic-integration
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4-production-costs-and-revenue11 主题
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Production & Productivity
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fiscal-policy-types-of-public-expenditure-and-taxation
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fiscal-policy-an-introduction
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regulating-the-financial-system
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monetary-policy-transmission-mechanisms
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central-banks-and-monetary-policy
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commercial-and-investment-banks
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financial-assets
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financial-markets
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conflicts-between-the-macroeconomic-objectives
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price-level-global-influences
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Production & Productivity
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5-perfect-and-imperfectly-competitive-markets-and-monopolies12 主题
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price-level-deflation
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price-level-inflation
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employment-and-unemployment
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the-economic-cycle
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the-impact-of-economic-growth
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economic-growth
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the-multiplier-and-basic-accelerator-process
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macroeconomic-equilibrium
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long-run-aggregate-supply-lras
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short-run-aggregate-supply-sras
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aggregate-demand-ad
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injections-and-withdrawals-into-the-circular-flow
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price-level-deflation
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6-the-labour-market7 主题
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7-income-and-wealth-distribution4 主题
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8-the-market-mechanism-market-failure-and-government-intervention16 主题
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government-intervention-price-controls
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government-intervention-indirect-taxation-and-subsidies
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government-intervention-an-introduction
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market-failure-market-imperfections
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market-failure-merit-and-demerit-goods
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market-failure-tragedy-of-the-commons
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market-failure-positive-externalities
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market-failure-negative-externalities
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market-failure-public-private-and-quasi-public-goods
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an-introduction-to-market-failure
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the-market-price-mechanism
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government-policies-to-reduce-poverty-and-inequity
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the-problem-of-poverty
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the-lorenz-curve-and-gini-coefficient
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income-and-wealth-distribution
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discrimination-in-the-labour-market
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government-intervention-price-controls
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9-measuring-macroeconomic-performance5 主题
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10-how-the-macroeconomy-works6 主题
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11-economic-performance8 主题
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12-financial-markets-and-monetary-policy6 主题
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13-fiscal-and-supply-side-policies5 主题
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14-the-international-economy16 主题
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using-index-numbers
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analysing-changes-to-market-equilibrium
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the-determination-of-market-equilibrium
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supply-curves-real-world-analysis
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supply-curves
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demand-curves-real-world-analysis
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demand-curves
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using-behavioural-economics
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behavioural-economics
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imperfect-information
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consumer-behaviour
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production-possibility-diagrams
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scarcity-choice-and-the-allocation-of-resources
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economic-resources
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economic-activity
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economic-methodology
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using-index-numbers
determining-wage-rates-competitive-labour-markets
Wage Rates in Perfectively Competitive Labour Markets
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In a perfectly competitive labour market, relative wage rates are determined at the point where DL = SL
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There is an assumption in perfect competition that all workers possess identical skills and receive the same wage rate
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In reality, workers have diverse skill sets and different motivational factors drive them
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An excess demand of labour leads to a shortage of workers in a particular occupation, causing wages tend to increase
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This causes a rise in wages and is an incentive to workers to enter the labour market for that occupation
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This increases the supply of labor (SL)
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An excess supply of labour leads to a surplus of workers in a particular industry, which causes wages to decrease
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This fall in wages cause some workers exit the labour market for that occupation
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The equilibrium for labour adjusts where
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There is no excess supply of labour
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There is no excess demand for labour
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Examiner Tips and Tricks
In the same way that perfectively competitive markets do not actually exist in reality (though some industries get close!), labour markets are never perfectively competitive. One of the reasons for this is the existence of asymmetric information. Workers and employers do not always know if there is a shortage or excess of labour, or they may not fully realise what the precise wage rate should be.
Labour markets are inherently imperfect.
Wage Determination in a Perfectly Competitive Labour Market
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Perfectly competitively firms are price takers in the labour market, as they have to accept the wage rate that workers are being paid in the industry
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The labour market is a type of factor market
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Factor markets follow exactly the same rules as product markets
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They are affected by changes to price, demand and supply
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They are affected by the price elasticity of demand and supply
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Diagram: Wage Determination in a Perfectly Competitive Labour Market
Diagram analysis
Market
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Labour market equilibrium occurs in the industry where demand for labour (DL) = supply of labour (SL)
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The equilibrium wage is W1
Individual firm
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The supply of labour for the individual firm is considered to be perfectly elastic, as workers have to accept the market wage (W1)
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If the firm offers a lower wage, it will struggle to recruit workers
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If the firm offers a higher wage, it will paying above the market rate and a large number of workers will apply to work there
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The SL is also the average cost of labour (ACL) or the marginal cost of labour (MCL)
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Labour market equilibrium for individual firms in perfect competition occurs when demand for labour (DL) or MRPL is equal to the supply of labour (SL)
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The equilibrium wage is W1 and the quantity of labour is Q1
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Responses