The intersection of the market demand for labour and the market supply for labour determines the equilibrium wage rate.

Question

Quizplus · Accepted Answer

This is the basic principle of how wages are determined in a competitive labour market. The market demand for labour represents the quantity of labour that employers are willing and able to hire at different wage rates, while the market supply for labour represents the quantity of labour that workers are willing and able to offer at different wage rates. The intersection of these two curves determines the equilibrium wage rate, where the quantity demanded of labour equals the quantity supplied of labour.

The Intersection of the Market Demand for Labour and the Market