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The labour market

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Should Congress increase the minimum wage?

A. By how much?

B. If increased will it help or hurt small businesses?

C. Is your employer affected by increases in the minimum wage?

D. In what way is your employer affected by minimum wage increases?

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The labour market is an informal mechanism where demand for and supply of labour interact.

Demand for labour arises mainly from employers' need for workers to produce goods and services. Firms need workers to make products, design those products, package them, sell them, advertise for them, ship them, and distribute them, among other tasks. No worker will do this for free, and so firms must enter into the labor market and buy labor. Firms determine the amount of labor that they demand according to several considerations: how much the labor will cost (as represented by the market wage), and how much they feel they need, much in the way that buyers in the goods and services market buy according to the market price and their own needs.
Firms are willing to buy labor up to the point where the marginal revenue product of labor is equal to the market wage.
The marginal revenue product is the extra revenue a firm generates when they buy one more unit of input (in this case, the input is labor: a unit of labor isn't a new employee, it's ...

Solution Summary

The labour market is assessed.

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Perfect competition and the Monopoly; Monopolistic competition & the Oligopoly; Supply and Demand of Labor; Distribution of Income; the Balance of Payments and Exchange Rates; International Trade

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d. Explain why the elasticity of demand for a firm's good, and the relative importance of labor in the production process influence the elasticity of demand for labor.
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