Factor Market Wage Floor

At that wage the quantity of labor supplied is 1 600 and the quantity of labor demanded is only 700.

Factor market wage floor.

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. 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. Diagram of wage determination.

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. A person seeking employment enters the factor market. 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. Clifford s 60 second explanation of the labor market for cooks and the affects of minimum wage.

Imposing a wage floor at 12 hour leads to an excess supply of labor. In the latter households are buyers and businesses are sellers. In cities wage rates are high while rural labour is available at low wage rates. Everyone participates in the factor market.

Employees are paid a wage through the factor market. This is reversed in the factor market. You might also like. The equilibrium wage rate in the industry is set by the meeting point of the industry supply and industry demand curves.

Households may also receive dividends or rent from a business as compensation for providing financial. Wage differentials are also found on account of imperfect market competition in the factor market. In a competitive market firms are wage takers because if they set lower wages workers would not accept the wage. 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.

Floors in wages. Setting price floor will obviously help few workers in getting higher wage. An organization that tries to protect the workers interests. In a monopsonistic labor market employers are wage.

Therefore they have to set the equilibrium wage we. Remember that the firms are now demanding and individuals. If minimum wage is set below the market price no effect is seen.