3.5.3 monopsony in labour market ppt

Question 1

What is monopsony power?

Answer 1

• A monopsony employer is a situation where there is only one major buyer or employer in a labour market.
• In such a scenario, the monopsonist has significant market power and can pay lower wages than would prevail in a competitive labour market.
• This is because workers have limited alternatives and are essentially forced to accept the wages offered by the monopsonist.
• The employer can exercise its market power to set wages below the level that would exist in a more competitive market.