BT s performance has declined to such an extent that market confidence has fallen dramatically, as revealed in their declining share price.
Appendix
I) Table of data showing the daily share prices of BT and Cable and Wireless, as well as the FTSE-100.
II) Line Graph that represents the daily share prices for the period that was followed.
III) A piece of advertising from Cable and Wireless pointing out the how close a competitor BT is.
IV) Print out from FT.com, used to provide data on what areas each company focuses its business on.
The main point that has to be noted about a free market is that there is no wage setter. The wage is determined in much the same way as a goods and services market. This means that the wage is set at the point where the demand and supply of labour intersect.
The diagram below shows labour market equilibrium.
Insert graph showing demand and supply of labour
Equilibrium wage being w, equilibrium quantity of labour
Supplied and demanded being q1.
D1 and S represent the initial demand and supply of labour. The point at which they intersect gives the equilibrium wage rate as W1 and the equilibrium quantity of labour employed as Q1. At point D2 the market is not in equilibrium because at the wage rate W1 there is a greater demand for labour than supply. This results in firms having to compete with one another to attract workers to their companies. Increasing the wages to W2 does this. This then attracts more workers and supply increases to Q2, once again creating market equilibrium.
Due to the nature of the market a monopsonist is a wage maker rather than wage taker. This means the firm has the power to resist wage increases and can even force the wage rate down. However a monopsonist is in competition against other industries. This is especially the case if the firm has to employ more workers. The only source of new workers may be from another industry. If this is the case the monopsonist will have to set a wage rate higher than the equilibrium wage in another industry in the hope that workers will be tempted to move to the industry in which the monopsonist is in.