7. 7
What is Marginal
Revenue Product?
The increase in total
revenue to a firm
resulting from hiring an
additional unit of labor or
other variable resource
12. How do we measure MRP
12
in Perfect Competition? A
perfectly competitive firm’s
marginal revenue product is
equal to the marginal product
of its labor times the price of its
product
13. What is Derived
Demand?
13
The demand for labor and
other factors of production
that depends on the
consumer demand for final
14. goods and services the
factors produce
14
What does the Supply
Curve for Labor show?
The different quantities of
labor workers are willing
to offer employers at
35. • Prices of substitute goods
• Demand for final products
• Marginal product of labor
35
36. What factors can
cause a change in the
Supply for Labor?
36
• Unions
• Demographic trends
• Expectations of future income
37. • Changes in immigrations
laws
• Education and training
What has happened to
Union Membership
since WWII?
37
38. Union power has declined
In which sectors has
union membership
increased since 1989?
38
39. Public sector and services
How does union
membership in the
U.S. compare to
39
40. other countries?
40
Union membership is far
below that of other
industrialized countries
What is a Monopsony?
A labor market in which a
single firm hires labor
47. How are wages compared
47
between the two markets?
A monopsony hires fewer
workers and pays a lower wage
than a firm in a competitive
labor market
Key Concepts
48. Key Concepts
48
• In a Perfectly Competitive Market, what
deter
• What is Marginal Revenue Product?
• What is the Demand Curve for Labor equal
to • How do we measure MRP in Perfect
Competit
• What does the Supply Curve for Labor show?
49. Key Concepts cont.
49
• How do Unions attempt to raise wages?
• What is Featherbedding?
• What is Collective Bargaining?
• What factors can cause a change in the Dema
• What factors can cause a change in the Suppl
Key Concepts cont.
50. • What has happened to Union Membership
sinc • How does union membership in the U.S.
comp
• What is a Monopsony?
• What is Marginal Factor Cost (MFC)?
• How are wages compared between the two
markets?
50
52. Marginal revenue product (MRP)
is determined by a worker’s
contribution to a firm’s total revenue.
Algebraically, the MRP equals the
price of the product times the
worker’s marginal product (MP).
The demand curve for labor is
the curve showing the quantities of
52
53. labor a firm is willing to hire at
different prices of labor. The
marginal revenue product (MRP) of
labor curve is the firm’s demand
curve for labor. Summing individual
demand for labor curves gives the
market demand curve for labor.
53
55. Derived demand means that a
firm demands labor because labor is
productive. Changes in consumer
demand for a product cause changes
in demand for labor and for other
resources used to make the product.
55
56. The supply curve of labor is the
curve showing the quantities of
workers willing to work at different
prices of labor. The market supply
curve of labor is derived by adding
the individual supply curves of labor.
56
58. Human capital is the
accumulated people make in
education, training, experience, and
health in order to make themselves
more productive. One explanation
for earnings differences is
differences in human capital.
58
60. 70
The monopsonist’s wage rate and
quantity of labor are determined where
the MFC equals MRP . Since at this
point the worker’s MRP is greater than
the wage paid, the monopsonist
exploits the workers.