How does supply and demand for labor differ from the supply and demand for goods and services?

Question

and why?

Answer 1

There are a number of possible reasons, and this depends on your definition of the situation and cause of unemployment.

The demand for labour is generated by firms aiming to macimise their profits subject to a function profit = wx-cl where q = quantity, x = price of good x, w = wage, l = labour force.

If you look in a textbook, you'll fint information about isocost lines and isoquants, which determine the demand for any fator of production.

The supply of labour is a function of individuals utility maximising decisions regarding leisure time and the supply of labour.

There isn;t anything fundamentally different between the market for labour and for goods and services, as labour is a service supplied by individuals. This is the aproach taken under Walrasian economics. However as you look deeper into it, like the dynamic causes of unemployment and efficiency wage unemployement, you can see differences that occur simply because the good that is supplied is the rational man's time and effort.

Try Varian or Nicholson, Microeconomics

Answer 2

Every one has 24 hours a day so when they work they are selling time and when they don't work they are consuming it. That is workers both supply and demand their time and so will will only increase work effort up to a balance point that will depends on wages. This makes the math for labor look like the math for apple growers with a fixed production, and who likes to eat apples, supplying and consuming apples. It can produce some odd results, like an increase in hourly wages can cause people to work less not more. That is the wealth effect produced by the increase in wages can cause someone to "buy" more leisure.

Answer 3

In the long run, there is no difference. In the short run, the supply and demand for labor is stickier than that of goods and services. That is especially the case when labor union is in play.

Politics power is not that easily represented in the supply and demand for labor.