Chapter 12, Problem 12AA

To determine

To find the factors of wages which restrict the influence of demand and supply

Answer to Problem 12AA

The two major factors that restrict the influence of demand and supply on wages are:

·         The skill of the workforce.

·         The available technology.

Explanation of Solution

Wages are the payment paid to the workers or laborers for the service they provide. It is paid to the workers on a daily or weekly basis.

The factors can be explained as:

·         The skill of the workforce creates different impacts on wages restricting the influence of demand and supply of labor, as if there is limited supply of labor and that too unskilled, the wage rate will depend on the need of the skilled labor. Lack of supply won’t make the wage rate high as the demand is for the skilled labor.

·         The available technology creates an effect discouraging the impact of demand and supply of labor as the wage rate is low when the firm is more based on capital intensive techniques and there is less need for the laborers. The wage will depend on the need of the labor and the technology being used. If the firm is more capital intensive, even if there exits the supply of labor, won’t increase the demand of labor and will have no effect on the wages considering that.