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HomeHomework HelpeconomicsMonopsony in Labor Markets

Monopsony in Labor Markets

A monopsony is a market structure where there is only one buyer for a particular type of labor, giving that buyer significant control over wage levels. In this context, the employer must raise wages to attract more workers, as they cannot hire as many at a fixed rate without increasing compensation. This concept is crucial in understanding labor dynamics, as it illustrates how power imbalances can affect wage determination and employment levels in specific markets.

intermediate
2 hours
Economics
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Overview

Monopsony in labor markets is a significant concept in economics that describes a situation where a single buyer has control over the labor supply. This market structure can lead to lower wages and reduced employment opportunities for workers, as the employer can dictate terms without competition. U...

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Key Terms

Monopsony
A market condition where there is only one buyer for a product or service.

Example: A single employer in a small town hiring all the local workers.

Labor Market
The supply and demand for labor, where employers seek to hire and workers seek jobs.

Example: The job market for teachers in a city.

Wage
The payment received by workers for their labor, usually expressed as an hourly rate or salary.

Example: A teacher earning $50,000 per year.

Market Power
The ability of a buyer or seller to influence the price of a good or service.

Example: A large company paying lower wages due to lack of competition.

Employment Level
The total number of people employed in a specific market or economy.

Example: The number of workers in the manufacturing sector.

Worker Welfare
The overall well-being and quality of life of workers, including job security and pay.

Example: Access to healthcare and fair wages for employees.

Related Topics

Oligopoly
A market structure with a few firms dominating the market, affecting pricing and competition.
intermediate
Perfect Competition
A market structure where many firms compete, leading to optimal pricing and wages.
intermediate
Labor Economics
The study of labor markets, employment, and the dynamics of wage determination.
advanced

Key Concepts

Labor MarketWage SettingMarket PowerEmployment Effects