3.5.3 Competitive Labour Markets Flashcards
What are the 5 characteristics of a perfectly competitive labour market?
- large number of potential workers and employers
- labour is homogenous
- there is perfect information
- firms are wage takers
- no barriers to entry and exit
What does labour being homogenous mean?
Meaning there is no difference in skill and qualification between workers and the assumption that any worker has all the skills required to take any job
How does no barriers to entry and exit exist in a perfectly competitive market?
No barriers to entry = every job has the same skill level/qualification to enter any job they choose
No barriers to exit = no notice periods, contracts e.c.t.
What are the 4 assumptions within a perfectly competitive labour market?
- perfectly competitive labour market
- perfectly competitive product market
- wage takers
- price takers§
In the short run, what economic theory sets it?
Law of diminishing returns
What will firms in a perfectly competitive market set out to do?
Profit maximise
For a firm in a perfectly competitive market, what is the diagram?
At one point, in a labour market, is a firm profit maximising?
When MRP = MCL (W)
