Wage Determination & Factors Affecting Pay

Question 1

What consists of a perfectly competitive labour market?

Answer 1

1. Homogeneous labour
2. Perfect knowledge
3. Perfect mobility
4. Large number of buyers and sellers of labour
5. Absence of market imperfections such as trade unions and intervention

Question 2

Why will wages always stay the same in a perfectly competitive labour market?

Answer 2

1. If wages increase - workers will know due to perfect knowledge
2. Can easily move to the job due to perfect mobility
3. Always do the job due to homogenous labour

= Workers will always move jobs which increases supply, which results in wages falling simultaneously

Question 3

LOOK AT ECONOMIC RENT

Answer 3

AND TRANSFER EARNINGS. TEXTBOOK P17?

Question 4

What are the factors affecting pay?

Answer 4

1. Historical reasons - certain groups getting paid less
2. Danger / unpleasantness of job
3. Immobility of labour
4. Skills / experience / training / qualifications
5. Age
6. Productivity

etc etc. Read article and look in book