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Through analyzing supply, demand and equilibrium in the context of competition, how do labor markets work?

Through analyzing supply, demand and equilibrium in the context of competition, how do labor markets work?

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Answer #1

Under perfect competation wages is determined by supply and demand for the labor.

Supply of increasing the function of the wage higher the wage higher the supply of the labor

Demand for labor decreasing function of the wages lower the wage firm will demand more labors.

This intersection of the demand and supply of the labors determines the wage rate.

The above graph showing th determination of the labors the equilibrium wage is point E the Gap between G toT shows the excess supply of the labor the competation between labors wage rate set again point E

The point G to H shows the shortage of the labors the competation between firm for labors the wage rate set at again point E.

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