Question

Joseph is a teacher. He also enjoys working on automobiles. Recently, joseph has been so busy at his teaching job that he has had no time to work on his car. He decided to pay his friend, larry, to do some vehicle maintenance for him. What is this type of economic transaction known as?

Answer 1

The economic transaction described takes place in the labor market. There is an employer who demands labor for a specific task (Joseph), and a second party, the owner of the factor of production demanded (his friend Larry), who is willing to provide such labor in exchange for a price.

This type of economic transation is for hiring labor, and is known as a work contract.

Answer 2

The correct answer is voluntary exchange in which the skilles are exchanged for money on a voluntary basis. This is a private arrangement and in does not involve a contract.