Explain why unemployment is impossible in a free market enterprise?
- LouiKungLv 51 decade agoFavorite Answer
Who says this?
Hong Kong has higher unemployment rate and boasted as the freest city of free market enterprises, particularly the quasi money in stock market and the under-table deal in real estate market. You shall learn what free market all about.
By the way the best premier of China, Zhu Rongji did sack all civil servants (14 millions) were working for the China Enterprise country wide. He reformed China reached goal of making corruption and bribery almost none during his era. The China GDP did grow 10+ % for ten consecutive years.
- megLv 71 decade ago
The theory assumes that labor is a commodity and an equilibrium wage exist at the value where the downward sloping demand for labor curve intersect the upward sloping supply of labor curve, and that labor markets clear because participants have perfect information so employees and employers find each other
- jerry wLv 71 decade ago
The labor market, if allowed to adjust freely to market conditions, will mean that the number of workers demanded will equal the number of workers supplied. That number will be the number that is actually hired. Do to the price allocation, all other workers would have taken themselves out of the market voluntarily. They would not be part of the supply curve at that price. If they take themselves out of the market voluntarily, they cannot be considered unemployed. Only those who want jobs are considered unemployed.
- Anonymous1 decade ago
There are two reasons
1. the nominal wage can be adjusted freely.
2. the market entry will ensure the lowest cost in the market, not by exploiting the cheap wage rate.Source(s): Anjaree