Wage and Benefit Determination

Individuals supply labor to the market at a price called the wage rate of labor. How much labor an individual supplies is related to his level of non-labor income, and cost benefits determination of time spent at leisure, vs. work.

A union can raise the wages of those who continue to be employed in a competitive labor market at the expense of the level of employment. So if the competitive equilibrium is at E0 and the wage is w0 employment is q0. If a union enters this market and sets a wage of W1, a new equilibrium will be established, e1. The supply curve has become w1xs0. At the new wage, W1, there will be q1q2 workers who would like to work but whom the industry will not hire. Employment will be q1. The decrease in employment due to wage increase is q1q2

Minimum wage is...
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