High wages in the labor market lead to reduced demand for labor, just as high prices in a product market lead to reduced demand for products. What does this analogy illustrate?

The analogy between high wages in the labor market and high prices in the product market illustrates the basic principle of supply and demand. When wages are high, employers may find it too expensive to hire as many workers, just like consumers may buy fewer products if prices are too high. This means that, in both cases, an increase in cost leads to a decrease in demand. For example, if a company raises its starting salary significantly, it might hire fewer employees because it can't afford to pay as many. This shows how costs affect the choices made by both employers and consumers in the market.