|
| To produce goods and services, a firm uses
| a
| leasure and wage, respectively.
|
|
| The workers sell their labour, or alternatively
| b
| the price at which they can sell
|
|
| they sell
|
| the goods.
|
|
| Then, labour supply depends on their valuations
| c
| raw materials, labour, and capital.
|
|
| of
|
|
|
|
| From the firm‘s perspective, it buys labour as
| d
| be willing to pay in wages, since
|
|
| long
|
| it is in the output market that the
|
|
|
|
| price is set.
|
|
| The firm‘s cost of labour is the wage, and its
| e
| affects the outcome.
|
|
| revenue of labour is
|
|
|
|
| The firm will consequently hire workers until
| f
| as that gives a positive
|
|
| the last produced
|
| contribution to its profit.
|
|
| This means that the structure in the output
| g
| to an increase in the labour
|
|
| market, i.e. the market where the firm sells its
|
| supplied.
|
|
| goods, will also affect what the firm will
|
|
|
|
| The structure of the labour market also
| h
| unit of the good costs as much to
|
|
|
|
| produce as the firm is paid for it.
|
|
| At initially low wages, an increase in the wage
| i
| attractive relative leisure, whereas
|
|
| often leads
|
| the income effect makes the
|
|
|
|
| individual wealthier.
|
|
| That is due to the substitution effect dominating
| j
| their leisure time, for a wage.
|
|
| The substitution effect makes the wage more
| k
| consumption of both ―other
|
|
|
|
| goods‖ (the wage) and of leisure.
|
|
| The increase in wealth can lead to an increased
| l
| over the income effect.
|
|
|
|
|
|
|
| The higher the wage is, the more important the
| m
| like, as well as on the level of
|
|
| income effect will be, until
|
| competition in the labour market.
|
|
| If a well-paid individual has her wage increased
| n
| finally it will start to dominate
|
|
| even
|
| over the substitution effect.
|
|
| The firm‘s demand for labour depends on what
| o
| further, she may choose to work
|
|
| the market for the firm‘s output looks
|
| less than she used to.
|
