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Miscellaneous

Factors affecting the demand of labors

The demand for labor is derived from the demand of goods and services.When the demand for goods and services rises the firms require more labor

to produce them. Thus the demand for labor is known as derived demand.

Thus when factors such as population, income rise the demand for goods

and services rise leading to a rise in demand for labor.

Factors affecting supply of labor

The composition of population:There is a higher portion of workers (low

dependency ratio) this means that there are more workers in a country

Educational institutes:This is rather complicated. If there are more

educational institutes

Wage is the cost of labor

Minimum wage: wage set by the government, which is above the

equilibrium

In the diagram above the equilibrium wage is !" and the equilibrium level

of employment is #$$ but when government imposes a minimum wage of

!%, the demand falls to &$ while the supply rises to #'$.Thus ##$ workers

are unemployed.

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Advantages of minimum wage

#. Those workers who remain employed enoy higher living standards

. Workers will be motivated to raise their productivity

Disadvantages of minimum wage

#. *reates unemployment+ The supply of workers rise while the demand

falls

. ise in government e-penditure

. /ight cause *ost push inflation

Why wages differ?

In the diagram above 0 is the demand curve and 1 is the supply curve of an

unskilled worker e.g. an electrician. Thus their wage is W. 2n the other hand

for a skilled worker the demand is higher (0#) because he is more

productive, also his supply is lower (1#)3 because gaining skills requires

time, efforts and money. Thus, their wage is W#

We can therefore see that skilled Workers are paid higher than unskilled

workers are.

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"haracteristics of money

#. 0urability

. 0ivisibility

. 5ortability

&. ;imited in supply

'.

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