Wage determination
Wage determination refers to how wages are set in labour markets. In competitive labour markets, wages equal the marginal revenue product of labour (MRPL) where labour supply equals labour demand. In non-competitive markets, wages may differ from MRPL due to monopsony power, unions, or wage regulation.
Real World
Amazon warehouse workers in the US earn wages set largely by Amazon's monopsony power in many local labour markets, meaning wages have historically been below competitive equilibrium levels.
Exam Focus
In 'evaluate' questions, compare competitive wage determination against monopsony and union outcomes to access top marks.
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