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Market this will definitely will define and tell the fair price of every price of the

labor. It means that market is the most reasonable determination of labor price in the basis of

the demand and supply labor in subsistence theory. Moreover, the laissez-faire doctrine statesthat:

he !market" will determine the e#uilibrium price of labor.

If there is increase in supply of labor, the supply curve will move.

he downward trend of the price of labor will only stop at the level of subsistence.

he level is the basis that would tell that individual wa$es of every laborers will keep their

earnin$s will be %ust and enou$h for their day-to-day e&penses. Meanin$, they can survive.

'hen the price is lower than the subsistence level of price, this is illo$ical. he

workers will be willin$ %ust to accept their income from their %obs in subsistence level. If the

price is below on what they need, they will tend not to accept that because if they do, they

will starve because the money that they will receive re$ularly will not sufficient to buy the

foods and other necessities they need in order to survive. his means that if you starve, you

will die. 'e can say that every decision of employees will define the survival of every

individual who are in the (ndto )rdlevel of business institutions. herefore, the price will $o

back to subsistence level.

In *lassical heory, this illustrate that the employers will %ust hire the ri$ht number of

employees where their total wa$es +which is treated as e&pense in the point of view of

capitalists is e#ual to the cost factor.

he profit ma&imization for the economy as a whole may be written: w pMn.

'here w means: money wa$e rate p is level of prices and Mn is e#ual to the mar$inalphysical product of labor

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he demand will be e&pressed as:

Ld=D(wp)

'here /d demand for labor and (Wp) real wa$e rate.

0ere, we can say that mar$inal product of labor when more workers are hired. 'e

should understand that when real wa$e rates are hi$h, employers can only hire a limited

amount of labor. hen, if real wa$es rates are low, employers can hire more workers. 'e have

to remember that wa$es are costs to employers.

If level of employment increased, the wa$es will $o down.

If wa$es rate increased, the demand for labor will $o down. his is because the cost of

hirin$ is e&pensive. 'hen the workers are low, the output is also low. 1o if the wa$es will $o

dow, the employers tend to hire hi$her. If there are more employees, the output will also

increase.