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Labor Market Equilibrium

Definition

Labor market equilibrium refers to the point where the demand for labor equals the supply of labor, resulting in a balance between the number of workers employers want to hire and the number of workers available for employment.

Analogy

Imagine a seesaw with job seekers on one side and job openings on the other. When both sides are balanced, it represents labor market equilibrium, where there is neither a shortage nor surplus of workers.

Related terms

Wage Rate: The wage rate is the price paid to workers for their labor. It is determined by factors such as supply and demand in the labor market.

Unemployment Rate: The unemployment rate measures the percentage of people in the labor force who are actively seeking employment but unable to find jobs.

Minimum Wage: The minimum wage is a legally mandated wage floor set by governments to ensure that workers receive a certain level of income.