1. A Purely Competitive Labor Market

2. Purely Competitve Labor Market What determines the wage rate paid for a specific type of labor? Labor Demand and Labor Supply – Characteristics of this market: – Nurmerous firms compete – Many qualified workers with identical skills – “wage takers”

3. Demand for Labor

4. Supply of Labor

5. Shifts of the Labor Supply Curve A change in any factor OTHER THAN THE WAGE that alters workers’ willingness to supply labor causes a shift of the labor supply curve. Factors that can lead to shifts: Change in preferences and social norms Changes in population Changes in opprotunities Changes in wealth

6. Labor Market Equlibrium Where is it found? – Intersection of the market labor demand curve and the market labor supply curve Each firm will maximize its profits by hiring up to the point of MRP = MRC