Equilibrium in a perfectly competitive labour market, and the wage differentials the model can and cannot explain.
Why do two people doing the same job in two towns earn different amounts?
The economics does not change between boards — only the reference number and the exam style. This page is written to the concept, so find your own line below and read on.
| Specification | Reference | Section |
|---|---|---|
| AQA A-Level Economics 7136 | 4.1.6.3 | Wage rates and employment in perfectly competitive labour markets |
| Edexcel A Economics 9EC0 | 3.5.3 | Theme 3 |
| Pearson Edexcel IAL Economics | WEC13 · Unit 3 | Business behaviour |
Equilibrium in a perfectly competitive labour market, and the wage differentials the model can and cannot explain.
AQA sets this out as 4.1.6.3 — Wage rates and employment in perfectly competitive labour markets, inside The labour market. Wage determination and the six interventions that distort it. It is assessed on Paper 1 and Paper 3.
Topic pages on this site are not written and abandoned. Each one gets the definition and the specification framing first, then the diagram drawn properly, then how the board actually examines it, and then the five branches below — added over months rather than dumped in one go.
This page is at the first stage. If you need this topic before then, the revision platform already covers the full specification interactively, and the Intelligence Briefing carries model answers on the essays most likely to appear.
Application is worth more marks than knowledge on this specification — AO2 carries 26–29% against AO1's 20–23%. So the examples are not decoration. They are where a third of the paper lives, and the ones that earn are the ones specific enough to be checked.
Competitive labour market equilibrium explains the average and not the spread.
Regional wage differences persist because labour is geographically immobile and housing costs bite.
Wage differentials are where the competitive model starts needing help.
Each of these becomes a full piece in its own right, in the branches below. What is here is the hook; the argument, the data and the essay application are what the pieces are for.
Every question on this specification is marked against four assessment objectives, and they are not weighted equally. Most revision treats a topic as a body of knowledge; the paper treats it as four separate skills applied to that knowledge. This topic is examined as a draw and explain topic, so here is what each objective looks like on it specifically.
| Weight | What it is | What it means on wage determination | |
|---|---|---|---|
| AO1 | 20–23% | Knowledge and understanding of terms, concepts, theories and models | Draw it with both axes labelled and every curve named. The marks are for the labels, not for the neatness. |
| AO2 | 26–29% | Application of that knowledge to economic contexts | Put the context onto the diagram — the named market, the actual price, the direction the question is asking about. |
| AO3 | 26–29% | Analysis of issues and their impact on economic agents | Explain the movement as a sequence: what shifted, what that did, what followed. Chains earn marks; assertions do not. |
| AO4 | 22–25% | Evaluation of arguments, using evidence to support a judgement | Question your own diagram. The elasticities you drew, the time period you assumed, and whether the curve should shift or the point should move. |
Everything above is the anchor. The pieces below take it further, and each one is built to train a particular assessment objective rather than to cover the topic again. They accumulate — nothing on this page gets deleted, it gets added to.
The revision platform covers the whole specification now, and the Academy marks your written answers against the framework examiners use. The library is the free layer, not the only one.
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