Topic 11 · micro
Labour Market
A wage is the price of labour, and it too is set by supply and demand — only in the labour market.
Labour supply and demand
Demand for labour comes from firms (it depends on productivity and demand for the product); supply comes from workers. Equilibrium sets the wage and employment.
What affects the wage
Productivity, education and skills, demand for the product, trade unions, the minimum wage.
The minimum wage
A price floor above equilibrium can create unemployment (labour supply > demand), but it protects low-paid workers.
🎯 Now possible
- apply supply and demand to labour
- name the factors behind wages
- explain the effect of the minimum wage
Cheat sheet
A wage is the price of labour (supply×demand)
Higher productivity → higher wage
A minimum above equilibrium → risk of unemployment
Demand for labour depends on demand for the product
Practice on this topic
Where to read more: Мэнкью — гл. 18–19