Economics – The basic economic problem - Factors of production | e-Consult
The basic economic problem - Factors of production (1 questions)
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(a) The reward to labour, which is wages, is determined by the interaction of supply and demand in the labour market.
- Supply of Labour: The supply of labour is influenced by factors such as the size of the working-age population, the participation rate (proportion of the population in the workforce), and the availability of training and education.
- Demand for Labour: The demand for labour is influenced by factors such as the level of economic activity (GDP), the productivity of workers, the cost of other factors of production (e.g., capital), and government regulations (e.g., minimum wage laws).
- Trade Unions: The strength and bargaining power of trade unions can also influence wages. Strong unions can negotiate higher wages and better working conditions for their members.
- Skills and Qualifications: Workers with higher skills and qualifications are generally able to command higher wages due to their increased productivity.
When the demand for labour is high and the supply of labour is low, wages will be high. Conversely, when the demand for labour is low and the supply of labour is high, wages will be low.