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Labor Markets: Demand, Supply, and Equilibrium

Learn about labor markets in economics, including the concept of labor demand, supply, and equilibrium. Explore the factors that affect labor markets, such as wages, market competition, and shifts in labor supply. Understand the implications of labor shortages and surpluses.

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Labor Markets: Demand, Supply, and Equilibrium

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  1. Economics: Principles and Applications, 2eby Robert E. Hall & Marc Lieberman

  2. Chapter 11:The Labor Market

  3. Factor Markets in General Product Markets Markets in which firms sell goods and services to households or other firms.

  4. Factor Markets in General Factor Markets Markets in which resources--capital, land, labor, and natural resources--are sold to firms.

  5. Labor Markets in Particular • Defining a Labor Market • Competitive Labor Markets • Firms in Labor Markets

  6. Labor Markets in Particular Perfectly Competitive Labor Market Market with many indistinguishable sellers of labor and many buyers, and that involves no barriers to entry or exit.

  7. Demand for Labor by a Single Firm • Goals and Constraints • The Firm’s Employment Decision When Only Labor Is Variable • The Firm’s Employment Decision When Several Inputs Are Variable

  8. Demand for Labor by Single Firm Derived Demand The demand for an input that arises from, and varies with ,the demand for the product it helps to produce.

  9. Demand for Labor by Single Firm Marginal Revenue Product (MRP) The change in revenue from hiring one more worker.

  10. Demand for Labor by Single Firm Wage Taker Any firm that takes the market wage rate as a given when making employment decisions.

  11. The Market Demand for Labor Market Labor Demand Curve Curve indicating the total number of workers all firms in a labor market want to employ at each wage rate.

  12. The Market Demand for Labor Complementary Input An input whose utilization increases the marginal product of another input.

  13. The Market Demand for Labor Substitute Input An input whose utilization decreases the marginal product of another input.

  14. Labor Supply • Individual Labor Supply • Market Labor Supply • Shifts in the Market Labor Supply Curve • Short-Run versus Long-Run Labor Supply

  15. Labor Supply Reservation Wage The lowest wage rate at which an individual would supply labor to a particular labor market.

  16. Labor Supply Labor Supply Curve Curve indicating the number of people who want jobs in a labor market at each wage rate.

  17. Labor Supply Long-Run Labor Supply Curve Curve indicating how many (qualified) people will want to work in a labor market after full adjustment to a change in the wage rate.

  18. What Happens When Things Change? • A Change in Labor Demand • A Change in Labor Supply • Labor Shortages and Surpluses

  19. What Happens When Things Change? Labor Shortage The quantity of labor demanded exceeds the quantity supplied at the prevailing wage rate.

  20. What Happens When Things Change? Labor Surplus The quantity of labor supplied exceeds the quantity demanded at the prevailing wage rate.

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