Monopsony Demand Curve With A Price Floor

With the minimum wage fixed at w the marginal cost of labor is constant with the supply curve at w until it intersects with the downward sloping marginal revenue curve or demand curve demand curve the demand curve is a line that shows how many units of a good or service will be purchased at different prices.

Monopsony demand curve with a price floor.

The imposition of a minimum wage of 5 per hour makes the dashed sections of the supply and mfc curves irrelevant. The imposition of a minimum wage of 5 per hour makes the dashed sections of the supply and mfc curves irrelevant. But for economists wanting to understand changes in the balance of power between buyers and sellers in different markets and how this affects prices profit margins and incentives it is important to have an understanding of monopsony and its effects. A monopsony employer faces a supply curve s a marginal factor cost curve mfc and a marginal revenue product curve mrp.

It maximizes profit by employing lm units of labor and paying a wage of 4 per hour. But you will be expected to discuss the. At a2 level you will not be expected to use diagrams to show monopsony power in product markets. The supply of labor that the monopsonist faces is the market supply of labor.

Because the monopsonist is the sole de mander of labor in the market the monopsonist s demand for labor is the market demand for labor. Monopsony in the real world although cases of pure monopsony are rare there are many situations in which buyers have a degree of monopsony power. It maximizes profit by employing lm units of labor and paying a wage of 4 per hour. The monopoly sets its product price based on the demand curve it faces.

Unlike a firm operating in a perfectly competitive labor market the monopsonist does not simply hire all the workers that it wants at the equilibrium.