Role of market forces in determining relative wage rates
Market forces — the push and pull of labour supply and demand — set wage rates. Workers in high demand or short supply earn more than workers who are easy to replace.
Formula
Derived Demand: MRP = MPP × Price of Output
Real World
Premier League footballers earn millions partly because the output they help produce — match-day revenue, TV rights, merchandise — is extremely valuable, so clubs' derived demand for elite players is intense.
Exam Focus
Always reference both supply and demand side factors when explaining wage differentials; one-sided answers rarely score full marks.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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