6.3 The Determination of Relative Wage Rates and Levels of Employment in Perfectly Competitive Labour Markets
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4 Terms
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How are wage rates determined in a perfectly competitive labour market
Wage rates are determined by the intersection of the supply and demand curves for labour
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What is the assumption about firms in a perfectly competitive labour market
Firms are wage takers, meaning they accept the market wage rate given
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What happens if there is a surplus of labour in a perfectly competitive market
If there is a surplus, wages will fall, reducing the number of workers willing to work.
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What happens if there is a shortage of labour in a perfectly competitive market
If there is a shortage, wages will rise, attracting more workers to the market
Note 
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