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Micro 18
- 3. Questions?
- 5. moral hazard temptation to act immorally
- 6. behavioral economics the psychology of economic behavior
- 8. Are people always rational? overconfidence too quick to conclude don’t easily change
- 9. Is fairness in more important than money? It can be
- 10. Ultimatum Game
- 11. Your Income Average Income A 100,000 100,000 B 200,000 300,000 C 50,000 25,000 Absolute or Relative?
- 12. What should the government do about income inequality?
- 13. Government can make income more equal Distorts incentives Alters behavior Less efficient allocation
- 14. How much inequality? What can government do? How to help the poor
- 15. If you take from the rich and give to the poor both have less incentive to work
- 16. If you take 25% from the A student and give to the F student both have less incentive to study
- 17. Marginal Product of Labor Change in output with the next worker
- 18. Labor Markets Hire until the cost to hire one more employee is equal to the marginal revenue
- 19. Marginal Revenue Product MRP = MFC
- 20. Derived Demand Factor demand derived from product demand
- 21. Derived Demand I can add value to your input
- 22. Elasticity of Demand for Inputs • Elasticity of final product • Substitutes • Proportion of total costs • Longer time
- 23. Labor Demand Curve Shift • Change in final product • Change in productivity • Change in related inputs • Substitutes • Complements
- 25. Minimum Wage Laws Government sets a minimum wage that can legally be paid Price Floor
- 26. $0 $5 $10 $15 $20 0 10 20 30 40 50 60 Supply Demand Wage Workers Equilibrium Wage 30 workers 30 jobs no unemployment Minimum Wage 40 workers 20 jobs 20 unemployed workers Minimum Wage 20 workers get a raise 10 workers lose job 10 new unemployed workers Minimum Wage
- 27. Labor Union One contract Strike Conflict between workers
- 28. $0 $5 $10 $15 $20 0 10 20 30 40 50 60 Supply Demand Wage Workers Equilibrium Wage 30 workers Unionizing Restriction 20 workers get a raise 10 workers lose job Union Restricts Supply
- 29. Efficiency Wages Higher wages make more productive employees
- 30. Efficiency Wages Employee Wage Pizzas Productivity Wage per Pizza Bob $10 5 $2.00 Bill $20 12 $1.67