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Respond to the response below:

Hello Everyone,

Why is the demand for labor called a derived demand?

Demand for labor is called derived demand due to the demand for labor to produce goods and services for consumers (Bernstein, 2018). When firms need products made, they need labor to make them therefore, the demand is derived from consumer demand, and if there is not more labor added, the firm could be missing out on additional profit.

In the labor market, what are the firm's demand curve for labor and the workers' supply curve of labor?

A firm's demand curve for labor is the amount of labor that can be employed to with fixed resources such as capital and land. The demand curve sloped down and to the right (Amacher & Pate, 2019). As labor is increased, there becomes a point when more labor is not producing any more product due to the fact there are not enough resources to support the additional labor. The workers' supply curve slopes up and to the right with a slight curve at the top, illustrating that as wages go up, workers want to earn more by working more, giving up time off or leisure time until the worker reaches a high enough wage that leisure is more important (Amacher & Pate, 2019). When the worker reaches enough income, they will start to use more leisure time, causing the top of the curve to turn back to the left.

How is a firm's wage normally determined in the labor market?

Wages are normally set using the marginal productivity theory, and when used in a competitive labor market, the supply of labor and the value of the labor of the marginal product set the rate of the wages earned and will affect competing firms (Amacher & Pate, 2019). At the company I work for, six unions negotiate wages in the union contract, and that is how wages are determined in that facility.

How could Amazon decide to raise its minimum wage to $15 per hour, despite the federal minimum wage being fixed at $7.25 per hour?

In a labor market that is reaching full employment, it becomes harder to attract employees without offering more money to get them to come work for the company (Berstein, 2018). By raising the wage, Amazon can attract more employees.

What are positive and negative effects of Amazon raising its minimum wage to $15 per hour on its employees, total revenue, and other companies and their employees?

The positive effects of the move by Amazon are, as stated earlier, to attract more employees in a tight labor market. More importantly, employees making much less due to location will receive a raise, which everyone likes. Another positive could be additional sales for Amazon themselves, as employees have more money to spend, and they may spend more with Amazon (Bernstein, 2018). The negatives may be an initial hit to the bottom line, but that is probably short-lived. The negative for other companies is that they will need to raise their wages appropriately if they intend to compete for labor with Amazon.