Factor Market Wage Floor

Clifford s 60 second explanation of the labor market for cooks and the affects of minimum wage.

Factor market wage floor.

Households may also receive dividends or rent from a business as compensation for providing financial. Employees are paid a wage through the factor market. You might also like. Diagram of wage determination.

Everyone participates in the factor market. An organization that tries to protect the workers interests. The equilibrium wage rate in the industry is set by the meeting point of the industry supply and industry demand curves. Imposing a wage floor at 12 hour leads to an excess supply of labor.

Households are sellers and businesses are buyers. Earnings equals the wage rate multiplied by the number of hours worked so an employee earning minimum wage and working the typical 40 hour week earns 7 25 40 290 per week 15 080 per year. A factor market is different from the product or output market the market for finished products or services. Therefore they have to set the equilibrium wage we.

In the latter households are buyers and businesses are sellers. In a monopsonistic labor market employers are wage. Union negotiated wage acts as a price. Floors in wages.

A person seeking employment enters the factor market. But if minimum wage is set above market price employers may distribute more work among few workers and terminate rest of the workers in order to not to pay more wage to more workers. In a competitive market firms are wage takers because if they set lower wages workers would not accept the wage. Wage differentials are also found on account of imperfect market competition in the factor market.

Inertia family attachment language religion caste are the factors by which labour has limited mobility from one region to another. Example of a price floor the original equilibrium in this labor market is a wage of 10 hour and a quantity of 1 200 workers shown at point e. In cities wage rates are high while rural labour is available at low wage rates. Minimum wage is an example of a wage floor and functions as a minimum price per hour that a worker must be paid as determined by federal and state governments.

Nominal wage is the amount earned in terms of dollars or other currency while the real wage is the amount earned in terms of what it can actually. If minimum wage is set below the market price no effect is seen. At that wage the quantity of labor supplied is 1 600 and the quantity of labor demanded is only 700.