COMPARE AND CONTRAST THE MARKET DYNAMICS FOR PRODUCED GOODS (AND SERVICES) WITH THE SUPPLY AND DEMAND MARKET CONDITIONS FOR LABOR. To get you started concentrate on two distinct chapters in the...

Labour market differs from the goods market in the sense that labour is desired in order to produce other goods and services. Labour market has a demand and supply curve like the goods market but the demand curve in labour market is not a direct demand rather it is a derived demand. For example, a hospital will employ more nurses if it finds a higher demand from the patients. An automobile company will also hire greater number of workers if consumers demand more new automobiles. Similarly, the demand for pilots is solely dependent on the demand for air travel. Firms want to maximize profit and produce optimal level of output thus required labour to produce it. The demand and supply of labour is intricately related with the demand and supply of the goods and services. When the demand for restaurant meal increases, there will b e an increase in the demand for chefs. So whether the labour demand curve will shift leftwards or rightwards, that depends on the demand for goods and services produced by the labour. Several other factors are also responsible to shift the demand curve for labour, indeed.
Firms are price takers in both the goods market and the labour market. As far as the supply of labour is concerned, it is elastic implying supply increases with higher wage rate. Thus, the demand curve for labour is downward sloping and the supply curve is also upward sloping just like the product market. The law of demand and supply is applied in the labour market just like the market for goods.
        In the labour market, the workers and the firms have two conflicting desires- workers prefer to wok more when the wage is high but the firms intends to hire more when the wage is low. The two conflicting desires actually balanced out in the equilibrium point. As the equilibrium price is detrained by the intersection of demand and supply curve in the goods market, the equilibrium wage rate is also determined by the intersection of labour demand and labour supply curve.
In the goods market, when the price is higher than the equilibrium price, surplus occurs in the market. Similarly, in the labour market, at the higher wage or the wage above the equilibrium wage rate, there will be surplus of labour that causes unemployment in the market. Due to excess supply of labour, the workers bid down the real wage rate until it comes down to the equilibrium level. So when the current wage differs from the equilibrium wage rate, competitive market forces help to push the wage rate towards equilibrium. As prices adjust in goods market, here the wages adjust to bring the labour demand and labour supply equal to each other. Economic incentives tend to move the wages towards the level of...