Labour market
Topic: Factors of Production, Entrepreneurship and Startups · NCERT: Class 12, Ch 5 "Market Equilibrium"
Meaning
The labour market is where labour is bought and sold. It works the other way round from a goods market: households supply labour and firms demand it. Labour is measured in hours, not in number of people. The price of labour is the wage rate, the extra cost to a firm of hiring one more unit of labour. The wage settles where the hours households wish to supply equal the hours firms wish to hire.
Example
In a city's construction sector, builders demand workers' hours and migrant workers supply them. If a housing boom raises demand for workers, the daily wage tends to rise.
Don't confuse with
- Goods market: here firms supply and households demand. In the labour market, the roles are reversed.
Related concepts
- Derived demand
- Demand for labour
- Marginal revenue product of labour
- Value of marginal product of labour
- Supply of labour
- Income-leisure trade-off
- Backward-bending labour supply curve
- Equilibrium wage rate
- Wage rate