perfectly competitive labour market

Question 1

characteristics of perfectly competitive labour market

Answer 1

-many potential workers and employers
-labour is homogenous
-perfect info
-firms are wage takes
-no barriers to entry and exit

Question 2

wage determination of a perfectly competitive labour market assumptions and graph

Answer 2

-assumptions: perfectly competitive labour and product market therefore, firms are price takers and wage takers. short-run, law of diminishing marginal returns

1)industry/market
-supply and demand
-x: quantity, y real wages

2)firm
-take wage rate: AC=MC=S
-same axis
-MRP=D of labour

-firms look to max revenue from workers, will hire workers up until MRP=W