3 Factors aggregate labour market

 

       1. Demand for labor: relationship between quantity demanded and real wage rate.    

Quantity of labour demanded: % of labour hours hired by all firms in a economy during a given time period depending on real wage rate.

Real wage rate: quantity of goods & services that an hour of labour earns

 

     2. Supply of labour: relationship between quantity of labour supplied an real wage rate

Quantity of labour supplied: % of labour hours that all households in an economy spend to work during a given time period depending on real wage rate.

Real wage rate: influences quantity of labour supplied because what matters to households is not how much they can earn, but what they can buy with what they earn.

 

     3. Labour market equilibrium: full employment

( intersection labour hours (x-as) amd real wage rate (y-as) )

-->Occurs when quantity of labour demanded = quantity of labour supplied

Shortage of labour: quantity of labour demanded > quantity of labour supplies

Surplus of labour: quantity of labour demanded < quantity of labour supplied