Wage determination in the labour market 3.5.3

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4 Terms

1
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What is meant by the equilibrium wage?

Refers to the wage rate at which the quantity of labour supplied by workers matches the quantity of labour demanded by employers

2
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On a curve, how is the equilibrium wage shown?

The point where the supply of labour and demand for labour intersect

3
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What are the conditions for a competitive labour market?

  • Many buyers (employers) and sellers (workers)- no single employer or worker has significant market power

  • Perfect information- job opportunities, wage rates, working conditions

  • Homogeneous labour- skills and abilities are similar#

  • Mobility of labour- movement from jobs

  • No monopsony power

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When does monopsony power occur in the labour market?

Occurs when a single employer or small group of employers dominate a labour market, giving them the ability to set wages below the competitive level