ABSTRACT
Economic theory provides powerful, and surprising, insights into individual and social behavior. Labor economics is the study of the workings and outcomes of the market for labor. More specifically, labor economics is primarily concerned with the behavior of employers and employees in response to the general incentives of wages, prices, profits, and nonpecuniary aspects of the employment relationship, such as working conditions. Positive economics is a theory of behavior in which people are typically assumed to respond favorably to benefits and negatively to costs. Behavioral predictions in economics flow more or less directly from the two fundamental assumptions of scarcity and rationality. The purpose of positive economic analysis is to analyze, or understand, the behavior of people as they respond to market incentives. The study of labor economics is mainly a study of the interplay between employers and employees or between demand and supply.
