Consider the labor market for grocery store cashiers. Who are the demanders in the market and who are the suppliers? The average hourly wage for cashiers is $10.93 per hour. Use a graph to illustrate the market for grocery store cashiers if labor supply is upward-sloping. Be sure to properly label the axes, curves, and equilibrium wage. Use the four core principles to describe why cashiers may have upward-sloping labor supply curves.
The Correct Answer and Explanation is:
In the labor market for grocery store cashiers, the demanders are the grocery store employers or businesses that need cashiers to serve customers. The suppliers are individuals (workers) who are willing to work as cashiers for a particular wage rate.
Graph Illustration:
- X-axis: Quantity of Labor (number of hours worked)
- Y-axis: Wage Rate (hourly wage for cashiers)
- Supply Curve (S): Upward-sloping, representing that as wages increase, more workers are willing to supply their labor.
- Demand Curve (D): Downward-sloping, showing that as wages increase, employers demand fewer workers (since it becomes more expensive to hire).
- Equilibrium Wage: The point where the supply and demand curves intersect. This is the market wage where the number of workers willing to work at that wage equals the number of workers employers are willing to hire. In this case, the equilibrium wage is $10.93 per hour.
Explanation of the Upward-Sloping Labor Supply Curve:
- Incentives Matter: As wages increase, the opportunity cost of not working becomes higher. People are more likely to supply their labor (work as cashiers) when the wage compensates them more for their time.
- Opportunity Cost: As wages rise, individuals may be willing to give up leisure time or other opportunities to work because the higher wage offsets the trade-off. More individuals, especially those looking to increase their income, may be drawn into the labor market.
- Marginal Utility of Income: Higher wages can provide more utility to workers, particularly those who have a greater marginal utility of income. As workers earn more, they are more likely to allocate more hours to work to maximize their utility.
- Substitution Effect: Higher wages make working more attractive compared to other activities. As the wage rate increases, workers may substitute leisure or other activities for work, increasing the quantity of labor supplied.
Thus, an upward-sloping labor supply curve reflects the positive relationship between wages and the willingness of workers to supply more labor hours.
