1 / 0

AP Economics

AP Economics. Mr. Bernstein Module 71: The Market for Labor January 2, 2014. AP Economics Mr. Bernstein. The Market for Labor You are (or will be) a supplier of labor. AP Economics Mr. Bernstein. The Market for Labor: Basics Labor is a Factor market (not Product market)

fineen
Download Presentation

AP Economics

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. AP Economics

    Mr. Bernstein Module 71: The Market for Labor January 2, 2014
  2. AP EconomicsMr. Bernstein The Market for Labor You are (or will be) a supplier of labor
  3. AP EconomicsMr. Bernstein The Market for Labor: Basics Labor is a Factor market (not Product market) Workers have a decision between labor and leisure Labor Supply Curves can be built and compared to Labor Demand Curves to determine equilibrium Equilibrium can be found in perfect competition and imperfect competition markets Price = Wage Equilibrium is where worker’s MU from add’l hour of labor = MU from one hour of leisure
  4. Hourly wage Labor supply IE>SE, downward sloping SE>IE, upward sloping Hours of work (week) AP EconomicsMr. Bernstein Supply of Labor Substitution Effect Higher wage increases opportunity cost of leisure… higher price of leisure means worker substitutes fewer hours of leisure for work
  5. Hourly wage Labor supply IE>SE, downward sloping SE>IE, upward sloping Hours of work (week) AP EconomicsMr. Bernstein Supply of Labor Income Effect As income rises, people consume more leisure (leisure is a normal good) …for most people, the supply curve is upward sloping
  6. AP EconomicsMr. Bernstein Shifts in the Supply of Labor Changes in preferences or social norms Post-WWII acceptance of women in workplace Changes in population Immigration + birth rate > death rate Changes in opportunity Increasing demand for health care, movement of manufacturing jobs overseas Changes in wealth Wealth effect (home, investments, etc.) is similar to income effect, increases consumption of leisure
  7. Wage Market Labor Supply AP EconomicsMr. Bernstein W* Equilibrium in the Labor Market Combine the demand from many firms and individuals Demand is downward sloping Supply is upward sloping Value of W* = Marginal Product of last unit of labor hired Market Labor Demand
  8. AP EconomicsMr. Bernstein Imperfect Competition in the Product Market In Perfect Competition VMPL = P * MPL = W Here, MR<P MRPL = MPL x MR… and is < VMPL MRPL is the firm’s Demand curve VMPL Wage MRPL Quantity of Labor (workers) Em Ec
  9. AP EconomicsMr. Bernstein Imperfect Competition in the Product Market Fewer units of labor are used if firm has pricing power (Em) than if they are price takers (Ec) VMPL Wage MRPL Quantity of Labor (workers) Em Ec
  10. AP EconomicsMr. Bernstein MFCL Labor Supply Imperfect Competition in the Labor Market A monopsony is a single buyer of a factor MFCL, or Marginal Factor Cost of Labor, rises with the upward sloping Labor Supply curve & is > W $12 $10 Wage Quantity of Labor (workers) 3
  11. AP EconomicsMr. Bernstein MFCL Labor Supply Imperfect Competition in the Labor Market Hire where MPRL = MFCL Monopsony pays W* < MRPL Remember, whether Perfect or Imperfect Markets, firms hire where MRPL = MFCL W* Wage MRPL Quantity of Labor (workers) E*
More Related