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Basic economic theory suggests that wages depend on a workers marginal revenue Product MRP. (this is basically the value that they add to the firm who employs them
MRP is determined by two factors
MPP - Marginal physical product - the productivity of a worker
MR - Marginal Revenue of last good sold - Effectively the price and demand for the good that the worker produces.
Another factor that determines pay, is the demand for the good. For example, the best football players get paid much more than the best hockey players because there is much more demand for watching football games, there is more money in the sport so clubs are willing and able to pay much higher salaries to get the service of the best players.
As well as demand, pay will be determined by supply. Workers who have specialist skills will generally be awarded with higher pay. You could say if someone spends 5 years to be trained as an accountant, they deserve higher pay to reimburse them for the investment of time in becoming skilled.
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David Ricardo's theory called the Iron Law of Wages came to be called?
David Ricardo's theory called the Iron Law of Wages came to be called the Theory of Efficiency of Wages. The Iron Law of Wages says that the worker is going to be paid the minimum wage needed to survive.
The theory of wages are based on supply and demand for a worker's skills is called what theory?
market theory of wage determination.
What economic theory does laissez-faire rely on to regulate prices and wages?
Laissez-faire theorists argue that the market forces of SUPPLY AND DEMAND will serve to set prices and wages in the marketplace.
What is economic surplus?
(in Marxist theory) the excess of value produced by the labor of workers over the wages they are paid.
What kind of science did david ricardo's theory called the iron law wages come to be called?
DISMAL
