Perfectly competitive labour market Flashcards
(5 cards)
1
Q
What are the assumptions of a perfectly competitive labour market?
A
1)labour is homogeneous
2)perfect mobility of labour
3)perfect information between employers and employees
2
Q
What is the price of labour in a perfectly competitive market?
A
the wage rate
3
Q
Why is the employer a wage taker?
A
the supply of labour is perfectly elastic
4
Q
Why does MRP fall?
A
due to diminishing marginal returns
5
Q
Why do wage differentials exist?
A
1) Due to excess supply or demand
eg limited supply of footballers due to high MRP
2)monopsony presence
3)trade union presence in one industry compared to another
4)compensating wage differentials
