1.6.3 Wage determination in perfectly competitive markets

Perfectly Competitive Labour Market

A market where many buyers and sellers interact, with firms and workers both being price takers.

Wage Determination

The process through which the market forces of supply and demand establish the wage level.

Equilibrium in Labour Markets

A state where the supply of labour matches the demand for labour.

MRP

Marginal Revenue Product; the additional revenue generated from hiring one more worker.

MC

Marginal Cost; the cost of hiring an additional worker.

Market Forces

Economic factors that affect the supply and demand of goods and services.

Wage Differential

The difference in wages that workers earn for similar work due to varying factors.

Human Capital

The economic value of a worker's skills, knowledge, and experience.

Elasticity of Supply

The responsiveness of the quantity supplied of labour to a change in wage rate.

Elasticity of Demand

The responsiveness of the quantity demanded of labour to a change in wage rate.

Collective Bargaining

Negotiation between employers and trade unions to determine employment conditions.

National Minimum Wage

The lowest remuneration that employers can legally pay their workers.

Perfect Knowledge

Complete and accurate information available to all buyers and sellers in the market.

Homogenous Jobs

Jobs that require similar skills and have similar responsibilities.

Homogenous Workers

Workers that possess the same level of skills and experience.

Profit Maximization

The process of increasing profits to the highest possible level.

High Demand and Low Supply

Conditions that typically lead to higher wage rates.

Low Demand and High Supply

Conditions that typically lead to lower wage rates.

Marginal Revenue of Worker

The additional revenue generated from each worker's output.

Graduate Vacancies

Job openings available for graduates.

Inelastic Workers

Workers whose quantity of labour supplied changes little with wage changes, often leading to higher wages.

Elastic Workers

Workers whose quantity of labour supplied changes significantly with wage changes, often leading to lower wages.

Trade Unions

Organizations that represent the interests of workers in negotiations with employers.

Anti-Discrimination Legislation

Laws designed to prevent discrimination in the workplace based on gender, race, and other factors.

Value of Human Capital

The perceived worth of a worker based on skills and education.

Marginal Physical Product

The additional output resulting from employing one more unit of labour.

Wage Rate

The amount of money paid to a worker in exchange for their labour.

Demand for Labour

The number of workers that firms are willing to hire at a given wage rate.

Supply of Labour

The number of individuals who are willing and able to work at a given wage rate.

Imperfectly Competitive Market

A market where individual firms or workers can influence the market wage.

Graduate Salaries

The average income earned by individuals who have completed a degree program.

Marginal Revenue Product of Labor (MRPL)

The additional revenue generated from hiring an additional unit of labour.

Wage Structure

The relative levels of wages among different types of workers or jobs.

Economic Value of Skills

The monetary worth assigned to the skills and experience of a worker.

Job Offer Demand

The demand from firms for new employees to fill available positions.

Supply Curve of Labour

A graph that shows the relationship between the wage rate and the quantity of labour supplied.

Demand Curve for Labour

A graph that shows the relationship between the wage rate and the quantity of labour demanded.

Employment Level

The number of people currently employed in jobs.

Market Equilibrium

The point at which the supply and demand for labour meet, determining the wage and employment level.

Economic Conditions

The current state of economic factors that affect the labour market.

Wage Setting Mechanism

The processes through which wages are established in a specific market.

Investment in Human Capital

The effort and resources devoted to enhancing the skills and expertise of workers.

Role of Economists

To analyze data and trends to understand wage determination and labour market dynamics.