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The Wise Investor


you two examples of markets you have probably
never thought about, yet they affect your finances
every day.
First, the labour market. We have already
discussed how your job is simply selling your time
and labour to someone, in return for money.
Millions of people sell their time through jobs, and
millions of people buy time and labour by hiring
employees.
This system has all the ingredients of a market.
Say, for example, that there is a low demand for
employees. Unemployment will be high, as there are
few jobs to go around. Employers will be able to
offer lower wages, since there may be several
people competing for each job.
Take the opposite situation, where there is a
strong demand for new employees but there are
few people looking for work. Employers will be
forced to offer higher wages to attract employees,
as each person will have the choice of several jobs.
In this way, the average level of wages is
determined by the supply and demand for labour. If
there is a big demand for labour but the supply is
low, in other words the number of unemployed
people is small, then the wages offered will be high.
The opposite, of course, applies when the number of
unemployed people is higher than the number of
positions.
My second example relates to interest rates.
Interest is simply a fee that is charged for borrowing
money for a period of time. Like borrowing anything
else of value, if you want to borrow money, then
you must pay for the privilege.
Now, at any one time, there will be a certain
number of people who want to borrow money and a
certain number who want to lend money. If there
are a large number of borrowers, but a small
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