The distinction between market wages and marginal wages must be made because of the downward slope of the labor demand curve.

Question

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The downward slope of the labor demand curve means that as wages increase, the quantity of labor demanded decreases. Market wages represent the wage rate at which the quantity of labor supplied equals the quantity of labor demanded in the overall labor market. Marginal wages, on the other hand, represent the wage rate at which the quantity of labor demanded equals the marginal product of labor. The distinction between these two concepts is important in understanding the relationship between wages and labor demand.

The Distinction Between Market Wages and Marginal Wages Must Be