... based, not market based. * The most important of Lewis's assumptions that he makes about rural economies is that there exists "a surplus labour supply". To put this assumption into context imagine that there are 10 brothers and sisters working on their family farm and together they produce 150 units. Now, as the family own the land it therefore means all the family work there. But the reality of it is they could probably produce as much output with only six of them working there. So in reality there is a surplus of labour. To make this point more mathematically you can say that the marginal product of labour is equal to zero, or if it is equal to anything then it is negligible. Wage is equal to Average product in this case so in the farm scenario above each family member gets 15 products. And so therefore wage is ...

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