How wages and employment are likely to be affected by the introduction of a trade union into a previously perfectly competitive labour market and into a monopsony labour market
A trade union sets a minimum wage for its members. In a competitive market this cuts jobs, but in a monopsony — where one employer dominates — it can raise both wages and employment at the same time.
Real World
When the Unite union negotiated a wage floor for warehouse workers at a distribution centre where one logistics firm was the sole employer, wages rose and the firm actually hired more workers — the monopsony outcome in action.
Exam Focus
Use two clearly labelled diagrams — one competitive, one monopsony — to contrast outcomes; verbal explanation alone rarely achieves full marks on this topic.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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