Activity 01
Simulation Game: The Labor Market Auction
Students are assigned roles as employers with different budgets and workers with different skill levels. They negotiate wages in an open 'market' to see how scarcity and productivity (MRP) influence the final pay agreements.
Explain how the marginal revenue product of labor determines a firm's demand for workers.
Facilitation TipDuring the Labor Market Auction, circulate and ask bidders to explain why they set their wage at a particular level, forcing them to connect their bid to the worker’s expected output.
What to look forPresent students with a table showing units of labor, total product, and the price of the product. Ask them to calculate the MRP for each additional worker and identify the wage at which the firm would stop hiring. 'Given this data, calculate the MRP for the 3rd and 4th worker. If the wage is £150 per worker, how many workers will the firm hire?'
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Activity 02
Think-Pair-Share: The MRP Challenge
Students are given profiles of different professions (e.g., a Premier League footballer vs. a nurse). They must use the MRP theory to explain the wage difference, then pair up to discuss whether the theory accounts for 'social value'.
Analyze the factors that cause shifts in the demand curve for labor.
Facilitation TipIn the MRP Challenge, have pairs whiteboard their Marginal Revenue Product calculations before sharing with the class, so peers can spot errors in logic.
What to look forPose a scenario: 'A government introduces a new regulation that increases the cost of producing a good. How might this affect the demand for labor in that industry, and why?' Guide students to discuss shifts in the demand curve for labor based on changes in product price and productivity.
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Activity 03
Inquiry Circle: Monopsony Power
Groups research a 'one-employer town' scenario, such as a remote NHS trust or a large distribution center. They map out how the lack of competition for labor allows the employer to drive wages below the competitive equilibrium.
Differentiate between the short-run and long-run demand for labor.
Facilitation TipWhen investigating monopsony power, provide a pre-drawn table of wage and employment levels under different policies so students focus on interpreting the data rather than drawing.
What to look forAsk students to write two distinct factors that could cause the demand for nurses to increase, and one factor that could cause the demand for factory workers to decrease. 'List two reasons why a hospital might demand more nurses. List one reason why a car manufacturer might demand fewer assembly line workers.'
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Generate Complete Lesson→A few notes on teaching this unit
Teachers approach this topic by anchoring abstract theory in concrete actions: hiring, bidding, and decision-making. Avoid the trap of letting students think wages are about effort alone. Instead, repeatedly ask, ‘What is the additional revenue this worker generates?’ Research shows that when students calculate MRP themselves, their understanding of labor demand deepens. For labor supply, emphasize the trade-offs students already experience, like choosing between extra study time and leisure, to make mobility and qualifications tangible.
Successful learning looks like students using MRP to justify hiring choices, applying monopsony diagrams to policy scenarios, and explaining wage differences with specific examples. You will hear them argue about why a barista likely earns less than a software engineer, not just recite definitions.
Watch Out for These Misconceptions
During the Labor Market Auction, watch for students who set wages based only on how hard workers seem to try or how much they ‘deserve’ rather than the actual output the worker is expected to produce.
Redirect their attention to the productivity cards provided for each worker type. Ask them to calculate the total revenue the worker would generate and compare that to the wage they bid.
During the Collaborative Investigation of Monopsony Power, watch for students who assume a higher minimum wage always reduces employment in any labor market.
Have them use the monopsony diagram to test different wage levels, recording employment and wage changes. Ask them to explain why the graph shows employment rising with a wage increase in this specific case.
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