Some top executives and some sportspeople are paid very high salaries. It is argued that this is inevitable as people are failed the market rate for the job. Use economic analysis to support this question. (12)


O/A level study resources,CTG




Wage or rate of labour is mainly determined by economic factors like demand for labour and supply of labour. However, social and political factors also influence the determination of wages, as labor is a unique factor or human factor.
 The main factor which determines the level of wages in a particular profession, it means the interaction of the demand for labour and supply of labour determines the wage rate in the labour market. If demand is high for a category of labour then it is likely that wages will rise. if the supply of certain categories of labour is limited it will likely raise the rate of labour in the market.
The demand for labour is greatly affected by the value of its MRP. labour produces a certain physical amount of goods which sells are the particular price, is called MRP( Marginal Revenue Product)
An improvement in the productivity of labour would increase the demand for labour; also increase the prices of the product will increase the demand for labour. So the higher MRP of labour increases the demand for labour, and the higher wages will be paid to the labour.
 In the context of the question, MRP of sportspeople and top executives is high, because people place a higher value on their services, and therefore their outputs commanded higher market price. As a result, they earn higher wages. For example, a football player is a personal innate talent and because of his ability, the club earns more revenue. It reflects his marginal productivity. In addition, his skill is rare and unique. And his services cannot be substituted with other factors. Also, the demand for his service is inelastic. At the same time supply of the player is extremely limited. The combination of higher marginal productivity, inelastic demand, and Limited supply lead to a higher equilibrium wage.
In the case of top executives again the supply is relatively inelastic, at least in the short run. Education and proper training required to become a qualified executive in the long run. it is difficult to get a qualified executive in the occupation because in this field required certain ability and talent. The supply of executives in the field is limited.
Thus we conclude that it is the high demand and relatively limited supply, the football player and top executive leads to a relatively higher equilibrium wage rate in the market.

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M Anwar Hossain (Senior teacher O & A level)

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