PC: Determination of RWR and LoE

• What is the economists' model of wage determination based on?

  Perfectly competitive labour market
• What determines the supply of labour in the labour market?

  Those who want to be employed
• Who creates the demand for labour?

  Employers
• What is labour market equilibrium?

  Where supply and demand for labour meet

  
• What does labour market equilibrium determine?

  The equilibrium price of labour

  
• What happens to the wage rate when the demand for labour falls?

  It falls from W to W1

  
• What is an example of a situation that causes a fall in demand for labour?

  A recession

  
• What occurs if the supply of labour increases?

  The wage rate falls from W to W1
• What is an example of an event that could increase the supply of labour?

  Raising the retirement age
• What term did Keynes use to describe inflexible wages?

  Sticky wages
• Why do wages not adjust to changes in demand in the real labour market?

  Due to sticky wages
• How does the minimum wage affect wage flexibility?

  It makes wages sticky
• What might happen during a recession instead of lowering wages?

  A few workers might be sacked
• How does the concept of sticky wages impact employment during economic downturns?

  It leads to layoffs instead of wage cuts