This paper examines three interrelated economics topics: the dynamics of competitive labor markets, strategies workers can use to differentiate themselves from other candidates, and the pricing limitations faced by monopolists. The first section analyzes why low-skill, high-visibility jobs—such as retail positions—tend to attract more applicants than available openings, especially during periods of slow economic growth. The second section identifies education, experience, attitude, and due diligence as key differentiators in a competitive job search. The final section argues that monopolists cannot charge arbitrary prices because price elasticity of demand, the availability of substitutes, and consumer behavior all impose a natural ceiling on profitability.
Most career choices are made within a competitive labor market. The number of job seekers is almost always higher than the number of available positions. This is especially true for low-skill jobs, such as working in groceries at Walmart. Two characteristics that contribute to a highly competitive job market are that the field is not high-skill and does not demand a high level of education. In such situations, the supply of workers tends to outweigh the demand for workers. The fact that Walmart is an employer with a high level of visibility within the community only adds to the level of competition for this type of job.
The nation continues to grow in population while generally experiencing slow economic growth, which only tightens the job market in the long run. For example, young workers are part of a large cohort that will consistently face a tight labor market (Pugh, 2010).
There are a number of measures job seekers can take in labor markets to reduce the number of substitutes — that is, to make themselves less interchangeable with other candidates. Some of the factors that help workers differentiate themselves are education, experience, and training. In addition, attitude and personality can help distinguish one candidate from another during the interview process.
Another characteristic that can help a job seeker stand out is due diligence: thoroughly researching the company so that the candidate knows a great deal about it and can reduce the learning curve and training time accordingly (Shidler, 2010). This makes the candidate more cost-effective and a better fit than other applicants, thereby reducing the employer's ability to substitute one candidate for another.
It is not possible for a monopolist to charge any price it wants. A monopoly may have no direct competition, but consumers still have the option of turning to substitutes or simply doing without the product. As such, there is still some price elasticity of demand for any commodity. Consumers may also choose to reduce their consumption of a good. For the monopolist, this elasticity creates a point of maximum profit, beyond which any additional increase in price will cause total profit to decrease. A monopolist cannot solve such losses by continuing to raise prices.
It is even conceivable that a monopolist may find no point on the demand curve at which it can turn a profit. Under such circumstances, the monopolist must simply accept the loss or exit the industry, because raising the price to cover costs will result in a reduction of revenue rather than an increase.
A monopolist cannot charge any price it wants. For any product — even in a monopoly — there is a point of maximum profit somewhere on the demand curve. Above that point, demand falls as consumers switch to a substitute, ration their consumption, or simply refuse to purchase the product. At this point, a marginal increase in price will result in a marginal reduction in profit. For the monopolist, increasing prices will not yield increased profits, but neither will lowering them. If the monopolist is not covering its costs at this point, the industry is unprofitable. The monopolist can then choose to reduce its costs or exit the business.
"Elasticity and necessity define monopoly pricing ceiling"
You’re 77% through this paper. Sign up to read the remaining 1 section.
Sign Up Now — Instant Access Already a member? Log inAlways verify citation format against your institution’s current style guide requirements.