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MicroeconomicsLabor Economics
Human Labor
Human Labor  Supply and Demand   You are the SupplyYou are “renting” yourself
Wage   Labor MarketRate                      Q
Wage   Labor MarketRate                      Demand                       Q
Wage   Labor MarketRate                      Supply                      Demand                        Q
Wage   Labor MarketRate                      Supply                      Demand                        Q
Wage   Labor MarketRate                      Supply                      Demand                        Q
Wage   Labor MarketRate                      Supply                      Demand          Q1            Q
Wage   Labor MarketRate                      Supply  P1                      Demand          Q1            Q
Wages and Profits
Wages and Profits    Profits attract attentionAttention turns into Competition   Competition raises wages
Risks
Risks If you are paid too little, thecompetition will hire you awayIf you are paid too much, yourcompany goes out of busin...
Marginal Product of Labor           MP
Marginal Product of Labor           MP Additional output a firm  gets by employing one    more unit of labor.
Value of theMarginal Product of Labor          VMP
Value of theMarginal Product of Labor          VMP  The value of the additionaloutput a firm gets by employing    one more ...
Value of theMarginal Product of Labor          VMP
Value of theMarginal Product of Labor            VMP      It’s not output,     It’s value counts
Derived Demand
Derived Demand Demand for anotherproduct determines the       demand
Drill  orHoles?
Pizzas           Total Pizzas   20  16  12   8   4   0         0   1   2        3     4   5                  Employees
Pizzas         Marginal Productivity    10    8    6    4    2    0         1st   2nd       3rd      4th   5th            ...
How                                       Value of  many                                      Marginal   Wageemployees?   ...
How                                       Value of  many                                      Marginal   Wageemployees?   ...
How                                       Value of  many                                      Marginal   Wageemployees?   ...
How                                       Value of  many                                      Marginal   Wageemployees?   ...
How                                       Value of  many                                      Marginal   Wageemployees?   ...
How                                       Value of  many                                      Marginal   Wageemployees?   ...
How                                       Value of  many                                      Marginal   Wageemployees?   ...
How                                       Value of  many                                      Marginal   Wageemployees?   ...
How                                       Value of  many                                      Marginal   Wageemployees?   ...
How                                       Value of  many                                      Marginal   Wageemployees?   ...
How                                       Value of  many                                      Marginal   Wageemployees?   ...
How                                       Value of  many                                      Marginal   Wageemployees?   ...
How                                       Value of  many                                      Marginal   Wageemployees?   ...
How                                       Value of  many                                      Marginal   Wageemployees?   ...
How                                       Value of  many                                      Marginal   Wageemployees?   ...
How                                       Value of  many                                      Marginal   Wageemployees?   ...
Hiring Rule
Hiring RuleAs long as marginal revenue is not less than marginal     cost - Keep hiring          MR≥MC
Value of the Marginal  Product of Labor        VMP
Value of the Marginal    Product of Labor          VMPDeclines due to the law of   diminishing returns
If you want wages to        go up
If you want wages to        go up Increase Demand  Decrease Supply
Wage   Labor MarketRate                      Supply  R1                      Demand          Q1            Q
Wage   Labor MarketRate                      Supply                       Increase  R1                       Demand       ...
Wage   Labor MarketRate                      Supply                       Increase  R1                       Demand       ...
Wage   Labor MarketRate                      Supply                       Increase  R1                       Demand       ...
Wage   Labor MarketRate                      Supply  R2                       Increase  R1                       Demand   ...
Wage   Labor MarketRate                      Supply  R2                       Increase  R1                       Demand   ...
Wage   Labor MarketRate                      Supply  R1                      Demand          Q1            Q
Wage   Labor MarketRate                      Supply                      Reduce  R1                  Supply               ...
Wage   Labor MarketRate            Supply                         Reduce  R1                     Supply                   ...
Wage   Labor MarketRate            Supply                         Reduce  R1                     Supply                   ...
Wage   Labor MarketRate            Supply  R2                         Reduce  R1                     Supply               ...
Wage    Labor MarketRate             Supply  R2                          Reduce  R1                      Supply           ...
Why are wages different?
Why are wages different?Income is based on your    Human Capital
Human Capital
Human CapitalEducation      EnergyTraining       Work HabitsExperience     TrustworthinessIntelligence   Initiative
If you want wages to        go up
If you want wages to        go up   Increase your  Human Capital
Why are wages different?
Why are wages different?  Compensating wage     differentials
America’s 10 Most Dangerous Jobs                               Per 100,000      Average                        3.3      Fi...
Discrimination      is  Expensive
101 lecture labor economics
101 lecture labor economics
101 lecture labor economics
101 lecture labor economics
101 lecture labor economics
101 lecture labor economics
101 lecture labor economics
101 lecture labor economics
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101 lecture labor economics

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  • Transcript of "101 lecture labor economics"

    1. 1. MicroeconomicsLabor Economics
    2. 2. Human Labor
    3. 3. Human Labor Supply and Demand You are the SupplyYou are “renting” yourself
    4. 4. Wage Labor MarketRate Q
    5. 5. Wage Labor MarketRate Demand Q
    6. 6. Wage Labor MarketRate Supply Demand Q
    7. 7. Wage Labor MarketRate Supply Demand Q
    8. 8. Wage Labor MarketRate Supply Demand Q
    9. 9. Wage Labor MarketRate Supply Demand Q1 Q
    10. 10. Wage Labor MarketRate Supply P1 Demand Q1 Q
    11. 11. Wages and Profits
    12. 12. Wages and Profits Profits attract attentionAttention turns into Competition Competition raises wages
    13. 13. Risks
    14. 14. Risks If you are paid too little, thecompetition will hire you awayIf you are paid too much, yourcompany goes out of business
    15. 15. Marginal Product of Labor MP
    16. 16. Marginal Product of Labor MP Additional output a firm gets by employing one more unit of labor.
    17. 17. Value of theMarginal Product of Labor VMP
    18. 18. Value of theMarginal Product of Labor VMP The value of the additionaloutput a firm gets by employing one more unit of labor.
    19. 19. Value of theMarginal Product of Labor VMP
    20. 20. Value of theMarginal Product of Labor VMP It’s not output, It’s value counts
    21. 21. Derived Demand
    22. 22. Derived Demand Demand for anotherproduct determines the demand
    23. 23. Drill orHoles?
    24. 24. Pizzas Total Pizzas 20 16 12 8 4 0 0 1 2 3 4 5 Employees
    25. 25. Pizzas Marginal Productivity 10 8 6 4 2 0 1st 2nd 3rd 4th 5th Employee
    26. 26. How Value of many Marginal Wageemployees? Marginal Product Cost Total Product VMP $30 Value Employee Pizzas MP (MR) (MC) Add Profit 0 0 0 $0 before wages 1st 5 5 $50 $15 $35 $10 2nd 11 6 $60 $15 $45 Cost to 3rd 15 4 $40 $15 $25Hire newemployee 4th 17 2 $20 $15 $5 $15 5th 18 1 $10 $15 -$5
    27. 27. How Value of many Marginal Wageemployees? Marginal Product Cost Total Product VMP $30 Value Employee Pizzas MP (MR) (MC) Add Profit 0 0 0 $0 before wages 1st 5 5 $50 $15 $35 $10 2nd 11 6 $60 $15 $45 Cost to 3rd 15 4 $40 $15 $25Hire newemployee 4th 17 2 $20 $15 $5 $15 5th 18 1 $10 $15 -$5
    28. 28. How Value of many Marginal Wageemployees? Marginal Product Cost Total Product VMP $30 Value Employee Pizzas MP (MR) (MC) Add Profit 0 0 0 $0 before wages 1st 5 5 $50 $15 $35 $10 2nd 11 6 $60 $15 $45 Cost to 3rd 15 4 $40 $15 $25Hire newemployee 4th 17 2 $20 $15 $5 $15 5th 18 1 $10 $15 -$5
    29. 29. How Value of many Marginal Wageemployees? Marginal Product Cost Total Product VMP $30 Value Employee Pizzas MP (MR) (MC) Add Profit 0 0 0 $0 before wages 1st 5 5 $50 $15 $35 $10 2nd 11 6 $60 $15 $45 Cost to 3rd 15 4 $40 $15 $25Hire newemployee 4th 17 2 $20 $15 $5 $15 5th 18 1 $10 $15 -$5
    30. 30. How Value of many Marginal Wageemployees? Marginal Product Cost Total Product VMP $30 Value Employee Pizzas MP (MR) (MC) Add Profit 0 0 0 $0 before wages 1st 5 5 $50 $15 $35 $10 2nd 11 6 $60 $15 $45 Cost to 3rd 15 4 $40 $15 $25Hire newemployee 4th 17 2 $20 $15 $5 $15 5th 18 1 $10 $15 -$5
    31. 31. How Value of many Marginal Wageemployees? Marginal Product Cost Total Product VMP $30 Value Employee Pizzas MP (MR) (MC) Add Profit 0 0 0 $0 before wages 1st 5 5 $50 $15 $35 $10 2nd 11 6 $60 $15 $45 Cost to 3rd 15 4 $40 $15 $25Hire newemployee 4th 17 2 $20 $15 $5 $15 5th 18 1 $10 $15 -$5
    32. 32. How Value of many Marginal Wageemployees? Marginal Product Cost Total Product VMP $30 Value Employee Pizzas MP (MR) (MC) Add Profit 0 0 0 $0 before wages 1st 5 5 $50 $15 $35 $10 2nd 11 6 $60 $15 $45 Cost to 3rd 15 4 $40 $15 $25Hire newemployee 4th 17 2 $20 $15 $5 $15 5th 18 1 $10 $15 -$5
    33. 33. How Value of many Marginal Wageemployees? Marginal Product Cost Total Product VMP $30 Value Employee Pizzas MP (MR) (MC) Add Profit 0 0 0 $0 before wages 1st 5 5 $50 $15 $35 $10 2nd 11 6 $60 $15 $45 Cost to 3rd 15 4 $40 $15 $25Hire newemployee 4th 17 2 $20 $15 $5 $15 5th 18 1 $10 $15 -$5
    34. 34. How Value of many Marginal Wageemployees? Marginal Product Cost Total Product VMP $30 Value Employee Pizzas MP (MR) (MC) Add Profit 0 0 0 $0 before wages 1st 5 5 $35 $15 $20 $7 2nd 11 6 $42 $15 $27 Cost to 3rd 15 4 $28 $15 $13Hire newemployee 4th 17 2 $14 $15 -$1 $15 5th 18 1 $7 $15 -$8
    35. 35. How Value of many Marginal Wageemployees? Marginal Product Cost Total Product VMP $30 Value Employee Pizzas MP (MR) (MC) Add Profit 0 0 0 $0 before wages 1st 5 5 $35 $15 $20 $7 2nd 11 6 $42 $15 $27 Cost to 3rd 15 4 $28 $15 $13Hire newemployee 4th 17 2 $14 $15 -$1 $15 5th 18 1 $7 $15 -$8
    36. 36. How Value of many Marginal Wageemployees? Marginal Product Cost Total Product VMP $30 Value Employee Pizzas MP (MR) (MC) Add Profit 0 0 0 $0 before wages 1st 5 5 $35 $15 $20 $7 2nd 11 6 $42 $15 $27 Cost to 3rd 15 4 $28 $15 $13Hire newemployee 4th 17 2 $14 $15 -$1 $15 5th 18 1 $7 $15 -$8
    37. 37. How Value of many Marginal Wageemployees? Marginal Product Cost Total Product VMP $30 Value Employee Pizzas MP (MR) (MC) Add Profit 0 0 0 $0 before wages 1st 5 5 $35 $15 $20 $7 2nd 11 6 $42 $15 $27 Cost to 3rd 15 4 $28 $15 $13Hire newemployee 4th 17 2 $14 $15 -$1 $15 5th 18 1 $7 $15 -$8
    38. 38. How Value of many Marginal Wageemployees? Marginal Product Cost Total Product VMP $30 Value Employee Pizzas MP (MR) (MC) Add Profit 0 0 0 $0 before wages 1st 5 5 $35 $15 $20 $7 2nd 11 6 $42 $15 $27 Cost to 3rd 15 4 $28 $15 $13Hire newemployee 4th 17 2 $14 $15 -$1 $15 5th 18 1 $7 $15 -$8
    39. 39. How Value of many Marginal Wageemployees? Marginal Product Cost Total Product VMP $30 Value Employee Pizzas MP (MR) (MC) Add Profit 0 0 0 $0 before wages 1st 5 5 $35 $15 $20 $7 2nd 11 6 $42 $15 $27 Cost to 3rd 15 4 $28 $15 $13Hire newemployee 4th 17 2 $14 $15 -$1 $15 5th 18 1 $7 $15 -$8
    40. 40. How Value of many Marginal Wageemployees? Marginal Product Cost Total Product VMP $30 Value Employee Pizzas MP (MR) (MC) Add Profit 0 0 0 $0 before wages 1st 5 5 $35 $15 $20 $7 2nd 11 6 $42 $15 $27 Cost to 3rd 15 4 $28 $15 $13Hire newemployee 4th 17 2 $14 $15 -$1 $15 5th 18 1 $7 $15 -$8
    41. 41. How Value of many Marginal Wageemployees? Marginal Product Cost Total Product VMP $30 Value Employee Pizzas MP (MR) (MC) Add Profit 0 0 0 $0 before wages 1st 5 5 $35 $15 $20 $7 2nd 11 6 $42 $15 $27 Cost to 3rd 15 4 $28 $15 $13Hire newemployee 4th 17 2 $14 $15 -$1 $15 5th 18 1 $7 $15 -$8
    42. 42. Hiring Rule
    43. 43. Hiring RuleAs long as marginal revenue is not less than marginal cost - Keep hiring MR≥MC
    44. 44. Value of the Marginal Product of Labor VMP
    45. 45. Value of the Marginal Product of Labor VMPDeclines due to the law of diminishing returns
    46. 46. If you want wages to go up
    47. 47. If you want wages to go up Increase Demand Decrease Supply
    48. 48. Wage Labor MarketRate Supply R1 Demand Q1 Q
    49. 49. Wage Labor MarketRate Supply Increase R1 Demand Demand Q1 Q
    50. 50. Wage Labor MarketRate Supply Increase R1 Demand Demand Q1 Q
    51. 51. Wage Labor MarketRate Supply Increase R1 Demand Demand Q1 Q
    52. 52. Wage Labor MarketRate Supply R2 Increase R1 Demand Demand Q1 Q
    53. 53. Wage Labor MarketRate Supply R2 Increase R1 Demand Demand Q1 Q2 Q
    54. 54. Wage Labor MarketRate Supply R1 Demand Q1 Q
    55. 55. Wage Labor MarketRate Supply Reduce R1 Supply Demand Q1 Q
    56. 56. Wage Labor MarketRate Supply Reduce R1 Supply Demand Q1 Q
    57. 57. Wage Labor MarketRate Supply Reduce R1 Supply Demand Q1 Q
    58. 58. Wage Labor MarketRate Supply R2 Reduce R1 Supply Demand Q1 Q
    59. 59. Wage Labor MarketRate Supply R2 Reduce R1 Supply Demand Q2 Q1 Q
    60. 60. Why are wages different?
    61. 61. Why are wages different?Income is based on your Human Capital
    62. 62. Human Capital
    63. 63. Human CapitalEducation EnergyTraining Work HabitsExperience TrustworthinessIntelligence Initiative
    64. 64. If you want wages to go up
    65. 65. If you want wages to go up Increase your Human Capital
    66. 66. Why are wages different?
    67. 67. Why are wages different? Compensating wage differentials
    68. 68. America’s 10 Most Dangerous Jobs Per 100,000 Average 3.3 Fishing 200 Logging 62 Pilot 57 Farm & Ranch 36 Roofers 35 Ironworkers 30 Sanitation 25 Machinist 19 Truck Driver 18 Construction 18 Source: Bureau of Labor Statistics
    69. 69. Discrimination is Expensive
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