and other types of labor income. Your labor income depends on how many hours you work and the wage rate

an employer will pay you for those hours. At the same time, some people own real estate, which they can either

use themselves or rent out to other users. Some people have financial assets like bank accounts, stocks and

bonds, for which they earn interest, dividends or some other form of income.

Each of these factor payments, like wages for labor and interest for financial capital, is determined in their

respective factor markets. For the rest of this chapter, we will focus on labor markets, but other factor markets

operate similarly. Later in Chapter 17 we will describe how this works for financial capital.

14.1 The Theory of Labor Markets

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Describe the demand for labor in perfectly competitive output markets

• Describe the demand for labor in imperfectly competitive output markets

•
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