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macro in a nutshell
The labour supply curve

Labour supply curveThe labour supply curve is a line indicating in a wage/employment diagram how much work (measured in work hours) is being supplied at different wage rates. It is upward sloping, meaning that people want to work more if the pay gets better.

The position of the labour supply curve reflects the institutional arrangements governing the labour market:

In an economy without trade unions, in which each worker negotiates the wage individually with the firm, the aggregate individual labour supply curve that results from summing up all individual work offers is in the blue position.

In an economy in which trade unions negotiate collective wage contracts with firms that are binding for all workers, the trade union labour supply curve is in the red position, to the left of the individual labour supply curve.


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