| Line 137: |
Line 137: |
| | Keeping costs down was what made Wal-Mart so powerful. Its marketing and advertising have only been mediocre. But it is the best in reducing costs. It pays its employees relatively little; it opposes unions forming among its workers; and it is ruthless in bargaining down the costs of its suppliers. Wal-Mart has made immense profits as a result. | | Keeping costs down was what made Wal-Mart so powerful. Its marketing and advertising have only been mediocre. But it is the best in reducing costs. It pays its employees relatively little; it opposes unions forming among its workers; and it is ruthless in bargaining down the costs of its suppliers. Wal-Mart has made immense profits as a result. |
| | | | |
| − | Does that seem unfair? No one has to supply Wal-Mart goods at a low price. If a supplier does not want to do business with Wal-Mart, then it doesn’t have to. No one has to take a job their either! | + | Does that seem unfair? No one has to supply Wal-Mart goods at a low price. If a supplier does not want to do business with Wal-Mart, then it doesn’t have to. No one has to take a job there either! |
| | | | |
| | In general, the demand for inputs by firms is called the “derived demand for inputs,” because it is derived from the consumer demand for the products the company sells. Because your family wants to buy gas from a gas station, this demand creates a demand by the station for its inputs: the gas and labor. | | In general, the demand for inputs by firms is called the “derived demand for inputs,” because it is derived from the consumer demand for the products the company sells. Because your family wants to buy gas from a gas station, this demand creates a demand by the station for its inputs: the gas and labor. |
| Line 145: |
Line 145: |
| | '''''A monopsony means only one buyer'''''. Stated another way, one buyer holds a monopoly on all purchases. | | '''''A monopsony means only one buyer'''''. Stated another way, one buyer holds a monopoly on all purchases. |
| | | | |
| − | The best example of a monopsony is when there is only one employer in a small, isolated town. If you want a job in that town, then your only place to work is at that company. Of course, very few towns are actually limited to just one employer. But for a certain types of job, there may be only one employer, and it has a monopsony over that type of job. | + | The best example of a monopsony is when there is only one employer in a small, isolated town. If you want a job in that town, then your only place to work is at that company. Of course, very few towns are actually limited to just one employer. But for a certain type of job, there may be only one employer, and it has a monopsony over that type of job. |
| | | | |
| | A monopsony is different from a competitively hiring firm in one significant way. When a monopsony needs to hire an additional worker, then it has to raise the wages for all its workers to that higher wage level in order to hire an additional worker. Its marginal cost for paying for this "factor" (labor), also known as its marginal factor cost (“MFC”), is more than the wage of merely the one additional worker. MFC equals the W of the additional worker PLUS the increased wage of all the other workers. | | A monopsony is different from a competitively hiring firm in one significant way. When a monopsony needs to hire an additional worker, then it has to raise the wages for all its workers to that higher wage level in order to hire an additional worker. Its marginal cost for paying for this "factor" (labor), also known as its marginal factor cost (“MFC”), is more than the wage of merely the one additional worker. MFC equals the W of the additional worker PLUS the increased wage of all the other workers. |