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INCOME EFFECT: One of two reasons for the law of demand and the negative slope of the market demand curve (the other is the substitution effect). The income effect results because a change in price gives buyers more real income, or the purchasing power of the income, even though money or nominal income remains the same. This causes changes in the quantity demanded of the good.

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EXPLOITATION:

The notion that capital owners and entrepreneurs of the second estate "take advantage" of workers of the third estate by paying them less than their contributions to production.
From a purely theoretical perspective, exploitation occurs if labor is paid a wage less, usually substantially less, than its contribution to production. While other inputs can, in principle, be subject to exploitation, concern is primarily directed toward labor because: (1) wages are the primary source of income for many workers and (2) other inputs, in practice, are less likely to encounter exploitation. As such, if anyone is likely to suffer from exploitation, it is someone whose main source of income is wages earned from the sale of labor services.

As part of the ongoing battle between the employees of second estate and employers of the third estate, exploitation is a politically charged term. In some circumstances it is bandied about without justification. In other circumstances, the charge is justified.

For instance, during the U. S. industrial revolution in the late 1800s and earlier 1900s labor was typically overworked, underpaid, and subject to hazardous working conditions. The labor union movement that emerged in the United States at this time was a direct response to this exploitation.

Similar working conditions in England in the early 1800s contributed to Karl Marx's critique of capitalism in his Communist Manifesto and Das Kapital, and which gave ammunition to revolutionaries who brought communist/socialist economic systems to the Soviet Union and China.

Monopsony is a handy theoretical model often used to analyze exploitation. In a market with a single buyer of labor services, the price (or wage) paid is less than in a competitive market. Moreover, this price (or wage) is also less than the marginal revenue product (that is, the contribution to production), hence labor is exploited.

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EXPLOITATION, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: July 1, 2025].


Check Out These Related Terms...

     | third estate | second estate | contributive standard | distribution standards |


Or For A Little Background...

     | four estates | equity | communism | socialism | political views |


And For Further Study...

     | economic goals | economic system | capital | entrepreneurship | labor | three questions of allocation | competitive market | marginal productivity theory | monopsony | monopsony, efficiency | monopsony financial market analysis | marginal revenue product |


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