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In the diagram above the equilibrium wage is 6 and the equilibrium level
of employment is 100 but when government imposes a minimum wage of
9, the demand falls to 40 while the supply rises to 150.Thus 110 workers
are unemployed.
In the diagram above D is the demand curve and S is the supply curve of an
unskilled worker e.g. an electrician. Thus their wage is W. On the other hand
for a skilled worker the demand is higher (D1) because he is more
productive, also his supply is lower (S1); because gaining skills requires
time, efforts and money. Thus, their wage is W1
We can therefore see that skilled Workers are paid higher than unskilled
workers are.
Characteristics of money
1. Durability
2. Divisibility
3. Portability
4. Limited in supply
5. Uniformity (look alike)
Regional problems: A regional problem arises in a particular region of a
country, such as unemployment storage of resources, overcrowd etc.
Types of external economies of scale
1. Ancillary services
2. Skilled labor
3. Better infrastructure
WHAT ARE THE ADVANTAGES OF LOCALIZATION?
1. Auxiliary services: These are services given to a large industry as a
source of support. For example: The garments industry in Bangladesh
had to import its materials from different countries. As it grew small
firms such as yarn and cotton firms also developed which benefited the
garments industry as they could take materials from the domestic firms
reducing costs.
2. Skilled labor: When a industry grows its gets the chance to train its
workers before they join the firm\
3. Better infrastructure
Mobility of labor: The ability of a worker to move from one region to
another (geographical mobility) or from one occupation to another
(Occupational mobility)
Barriers of mobility
1. Retraining costs
2. Retraining time
3. Natural ability