Question

Economic laws have been true throughout human history. As an example, consider the following passage, from Professor Samaddar’s lectures on the economy of Ancient India:

“Weaving in India has been encouraged from time immemorial... As is the case now-a-days, labourers working overtime were given extra payment... and special rewards were given for working on holidays.” (p.117)

Using a supply and demand diagram in the market for labour, clearly explain why Indian workers working overtime or during holidays were paid extra

Answer 1

Skilled laborers play an important role in the flourishment for waving industries.To improve the productivity and efficiency of the waving industries the service of skilled workers is very important.Thus it is important for the weaving industries to provide incentives for the workers. This can be explained with the help of labor using demand and supply curve .
In the given figure labor market depicts the changes in the supply and demand of labor due to changes in the wages.
In the given figure labor demand is a downward slipping curve and the supply of labor is an upward supply curve.At the wage rate w¹ which is the minimum wage for the laborers the demand for labor is LD¹ and the supply of labor is LS¹.Here at the minimum wage the supply of labor exceeds the demand for labor.Now when the workers of weaving industry decide to work for more hours they sacrifice their leisure for work that is there is a substitution between work and leisure.People will prefer more hours of work than the leisure this the workers are paid high and now the wages of workers increases from w¹ to w².When there is an increase in the wages the demand for labor exceeds the demand for supply.