This discussion will include the definition and how it is used to determine the demand for labor. The factors used to determine the supply of labor market will be discussed. This will include the factors that have changed the supply of labor market over the last twenty years. Price and quantity of labor determination over a period of will be explained. Income inequalities will also be determined, if there are any. The way that income inequalities are measured, and how they have changed from 1980 to the present will be discussed. What role does the government play in the terms of inequality? There will also reasons for this and against this provided. Next, nations trading will be discussed. The concept of “Comparative Advantage” will be discussed. If a nation had an isolation policy would they be better off economically will also be answered. Then the trade balance of the United States will be discussed. The problems with having a negative trade balance, and how it can be corrected will be included in this discussion. The last thing that will be discussed is the exchange rates. The significance of currency devaluations concerning the United States, as well as other countries will be the last thing discussed. Now, to discuss derived demand.
Derived demand is the product that is produced by labor for a consumer (McConnell, Brue, Flynn, 2010). This demand can be an increase or a decrease. A good example of this is business that sells DVD’s. When a customer comes in asking for a certain DVD this creates a demand. Derived demand starts with the demand of the customer. When the customer demands the DVD this creates a “flowing value chain from right-to-left” (Lohrey, 2015). When a customer ordered the DVD it created a consumer demand. The materials used to make the DVD is the first step. Each of these steps increase the price of the DVD. The raw materials needed to make the DVD to the finished product.
Demand and supply is used to determine the amount of labor in the labor market. There are two things that determine the labor market. The first one is wages and the second one is the firms/businesses (Morgan, 2015). The workers supply the labor needed for production for wages. The businesses supply wages for the labor of the workers. A firm is a derived demand. The derived demand is associated with the output of the firm. When a firm increases in output the demand for more labor increases. If a firms output decreases the demand for labor will decrease. This can contribute to layoffs of employees. There are other factors that determine the supply of labor.
“Economic” conditions are a major factor that affects the supply of labor. During a recession there will be less people needed for labor due to less “disposable income” for the consumers (Houghton, Mifflin, Harcourt, 2014). “Globalization” is another factor that effects supply of labor. The reason for this is because of the amount of work done outside the United States. The reason for this is a lower cost in production of the same item. The third thing is wages and benefits. As of “April 2011 U.S. Bureau of Labor Statistics there is an upward pressure on wages, and downward pressure on benefits” (Houghton, Mifflin, Harcourt, 2014). Automated technologies and natural disasters also have an effect on the supply of labor. Immigration is a major factor in the change in supply over the last twenty years. Over the last twenty years there is more immigrants that have been allowed to settle in the United States. The arrival of more immigrants has hurt the Americans getting jobs. One of the reasons for this is because the immigrants will work cheaper than people that was born in the United States. Businesses like this because it keeps their