Economic theory of labor markets suggests that wages are governed by labor supply and labor demand.

Question

Quizplus · Accepted Answer

According to the economic theory of labor markets, wages are determined by the interaction between the supply of labor and the demand for labor in a given market. When the supply of labor is greater than the demand for labor, wages tend to fall, and when the demand for labor is greater than the supply of labor, wages tend to rise. This suggests that wages are largely determined by market forces and not by arbitrary decisions made by employers or employees.

Economic Theory of Labor Markets Suggests That Wages Are Governed