Introduction

The economic theory of supply and demand makes use of two basic laws. The law of supply states that, as the price of a product rises, the producer will supply more of the product. The law of demand states that, as the price of a product rises, the consumer will demand less of the product. It is the interaction of these two laws that determines the price of the product and the quantity produced at any given time. Economists note that labor can also be considered to be a product and wages to be the price of the product. In this case, however, the law of supply may operate in an unusual way. In general, as a workers wage (the price) increases, he or she is willing to supply a greater number of hours of labor (the product), because the higher wage makes working additional hours more useful and less costly than some other way of spending the time. But when the wage reaches a fairly high level, the worker may find that he or she has less need to work additional hours because of the larger amount of money the worker is making. Hence, as the wage continues to rise, the worker will labor less (that is, produce less of the product) and devote more time to enjoying the additional income. The term wages refers to the money an employee receives for his or her work. When employees are dissatisfied with their wages, they will sometimes go on strike, or refuse to work. Bettmann/Corbis.

What It Means
A wage is the payment that a worker or employee receives for his or her labor. A wage is commonly in the form of money, but it can also be in goods. A wage is usually paid for a specified quantity of labor, which most often is measured as a unit of time.