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... In the first part of this essay will explain about the labour market theory. In the second part will talk factors affecting demand and supply of labour. ...
In labour markets there are two kinds of markets, one is a perfect labour market and the other is an imperfect labour market. The characteristic of the perfect labour market is that every one is a wage taker, which means employers and employees are not able to influence the wage rate. ... There are three other assumptions of the perfect labour market, which are freedom of entry, perfect knowledge and homogeneous labour. In here key words are homogeneous labour, the wage differences between skilled and unskilled workers will not occur when all labour is homogeneous. Under perfect competition, the interaction of the market demand and supply of labour is determined wage rate and employment. ... On the other hand, for employers the higher the wage rate they have to pay, the less labour they will employ. Additionally, employers will replace labour with something else, such as machineries and some other new technologies. On the other hand, the characteristic of the imperfect labour market is that every one is not wage taker. ... Workers are able to be member of trade union member under the imperfect labour market and use collective bargaining to increase their wage rate. Consequently, when the firm want to employ more labour, they need to pay a higher wage rate to attract workers. But other way round also possible, if the firm want to employ less labour they can pay a lower wage rate.
As in the above paragraph mentioned wage rate is determined by the demand and supply of labour. The demand for labour depends on the physical productivity of labour and the price of the product.
Approximate Word count = 1465
Approximate Pages = 5.9
(250 words per page double spaced)
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