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Supply and Demand of Labour
The demand of labour is a derived demand from
the demand of the good/service the employer
The supply of labour shows how many are willing to
work for that wage rate.
The MRP of labour is the marginal productivity
increase x marginal revenue increase. This is shown
as the demand curve on the diagram…read more

Slide 3

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Perfect competition
The wage rate is set at the WHOLE MARKET EQUILIBRIUM with each
individual employer becoming a wage taker at wage level 3 and employment level
matching.…read more

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In a monopsony there is an additional "supply" curve. As
supply is equal to the average cost of labour the new
curve represents the marginal cost of employing one
more unit of labour.
An extra cost is incurred because in order to attract a new
employee the firm must increase the wage rate, and in
doing so must increase their current workers rage so that
they are equal.
E.g. A firm has 4 workers being paid £20 an hour, but the
5th worker will cost them £25 per hour. The firm must
not only pay the £25, but also the extra £20 to match the
new wage. This means there is an average cost of £25 but
a marginal cost of £50 for the new worker being paid.…read more

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Trade Unions
Trade unions were formed in order to protect
employees from discrimination, unlawful
termination and in order to receive a fair wage.
Trade unions strength in bargaining is dependant on
two factors; the level of unemployment and the
competitiveness of the market of the employer.
For example during times of low unemployment, a
trade union representing employees of a monopoly
firm have strong bargaining power due to the lack of
substitute employees and the financial ability for the
firm to pay higher wages.…read more

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Trade Unions
Protect employees
Allow employers to negotiate with staff through one channel
Standardized wages within a market
Better working conditions
Offset monopsony powers
Implement productivity deals
Can create an artificially high wage rate and reduce unemployment
whilst increasing inflation
Militant strikes don't occur so often now, but strikes are still extremely
disruptive and potentially damaging to firms and irritating to…read more

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The second half of this large presentation covers the theory of the firm, examining the different market structures n some detail.

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