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Economics: An A-Z Guide by Matthew Bishop

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L

Labour

One of the factors of production, with LAND, CAPITAL and ENTERPRISE. Among the things that determine the SUPPLY of labour are the number of able people in the POPULATION, their willingness to work, labour laws and regulations, and the health of the economy and FIRMS. DEMAND for labour is also affected by the health of the economy and firms, labour laws and regulations, as well as the PRICE and supply of other factors of production.

In a perfect market, WAGES (the price of labour) would be determined by supply and demand. But the labour market is often far from perfect. Wages can be less flexible than other prices; in particular, they rarely fall even when demand for labour declines or supply increases. This wage rigidity can ...

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