Th3.5: ^^ Perfect Competition

Question 1

In a perfectly competitive labour market, we make the same assumptions as in…

Answer 1

a perfectly competitive product market

Question 2

Therefore wages are determined…

Answer 2

purely by demand and supply and all workers are paid the same

Question 3

What would workers do if they were not paid the same?

Answer 3

simply move somewhere else where the wage rate in the industry was higher

Question 4

What would happen if a waiter in Liverpool moved to be a waiter in Portsmouth because the wage rate was higher there?

Answer 4

this would reduce supply and lead to an increase in wages in Liverpool, and increase supply and lead to a fall in wages in Portsmouth

Question 5

Draw the graph regarding this three times!

Answer 5

Refer to PP

Look at Graph 43

Question 6

Refer to PP

Look at Graph 43. However, in an imperfectly competitive market…

Answer 6

wages will not always be set where demand equals supply