The determination of relative wage rates and levels of employment in imperfectly competitive labour markets Flashcards
State 3 factors that contribute to imperfections in the labour market
- monopsony power
- trade unions
- imperfect information
Define monopsony
when there’s only one buyer in the market
How can monopsony’s use their power
can use their monopsony power to force doesn’t the wages/prices they have to pay by negotiating lower prices/ wages
On a monopsony curve, why does S=ACL
the wage we have to pay labourers is the average cost of labour and The supply curve tells us what wage we have to pay to get A certain number of workers to supply their labour and work for us
On a monopsony curve, where does a monopsony profit maximise
where MC of L meets MRP - this is where the a monopsony will hire
Stat how a monopsony differs from. Perfectly competitive labour market
the wage in perfect competition is higher than it is in monopsony
- there is only one employer in the labour market (monopsony), they don’t have to compete with other employers to attract labour and so they pay alower wageand hirefewer workers. This means thatemploymentandwages are bothlowerin a monopsony labour market.
- in a perfectly competitive labour market, there arelotsof employers = stay at the equilibrium
State how imperfect information may contribute to imperfections in a labour market
Some workers might not be aware of higher paying jobs in other industries or with other firms. Some workers might not understand the long term benefits of investing in improving their skills and education. This can limit the productivity and potential progression of workers. It makes the market inefficient.
State how trade unions may contribute to imperfections within the market
Higher wages that trae unions protest for limiting the supply of labour =could cause unemployment
