households sell their labor services to firms if payment exceeds the value of the leisure time they must give up.
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Open it In one type of factor market, called labor markets , households offer to sell their labor services when the payment they expect to receive exceeds the value of the leisure time they must forgo. In contrast, firms hire workers when they
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2. TYPES OF MARKETS fact may seem obvious, but it is fundamental to our understanding of markets. If a buyer values something more than a seller, not only is there an opportunity for an exchange, but that exchange will make both parties better off.
<span>In one type of factor market, called labor markets , households offer to sell their labor services when the payment they expect to receive exceeds the value of the leisure time they must forgo. In contrast, firms hire workers when they judge that the value of the productivity of workers is greater than the cost of employing them. A major source of household income and a major cost to firms is compensation paid in exchange for labor services.
Additionally, households typically choose to spend less on consumption than they earn from their labor. This behavior is called saving , through which households can accum
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