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Sagot :
The market for labor is the same as the product market, so prices and wages match thus wages and salaries generally determined by the market for labor.
How do wages affect the supply of Labor?
A rise in wages makes labor more expensive relative to capital, firms will substitute capital for labor. This means that less labor will be used to produce whatever output the firms in the industry sell. If the wage is free to adjust in response to market forces it will move to We, where the demand for labor equals the supply. A higher wage increases the opportunity cost or price of leisure and increases worker incomes. The effects of these two changes pull the quantity of labor supplied in opposite directions. A wage increase raises the quantity of labor supplied through the substitution effect, but it reduces the quantity supplied through the income effect.
The correct answer is option C.
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The labor market exists the same as the product market, so prices and wages match therefore wages and salaries are generally specified by the market for labor.
What is the difference between wages and salaries?
A wage exists as a payment created by an employer to an employee for work done in a distinctive period. Some examples of wage payments contain compensatory costs such as minimum wage, prevailing wage, and yearly bonuses, and profitable payments such as prizes and tip payouts. The definition of a salary exists as a regular fixed payment that an individual gains for performing work during a precise period. An example of salary stands the fixed salary of $100,000 a year paid to a doctor. Fixed compensation for services, paid to an individual regularly.
A rise in wages makes labor additional expensive relative to capital, firms will replace capital for labor. This indicates that less labor will be used to produce whatever output the firms in the industry sell. If the wage exists free to adjust in response to market forces it will move to We, where the demand for labor equals the supply. A higher wage raises the opportunity cost or price of leisure and increases worker incomes. The consequences of these two changes pull the quantity of labor supplied in opposing directions. A wage increase increases the quantity of labor supplied through the substitution consequence, but it decreases the quantity supplied via the income effect.
The correct answer exists in option C.
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