The document discusses labor markets under conditions of perfect competition for goods and labor. It analyzes how a firm's demand for labor (derived demand) is determined by the marginal revenue product of labor curve. This curve can shift due to changes in productivity or price of the good produced. An increase in either factor causes the curve to shift right and increases labor demand. The firm hires workers up to the point where the wage rate equals marginal revenue product. The document also examines how the firm responds to changes in the market wage rate, hiring more workers if wages decrease and fewer workers if they increase.
This presentation basically tells how the firm makes decisions in a competitive market. To make concepts here more understable, I have prepared graphs and mathematical equations.
Comparative Economic Systems - Intro to Capitalism. Read about the Capitalism, its advantages and disadvantages. You will find it helpful in your studies. Don't forget to like and follow.
Equilibrium of Firm Under Perfect CompetitionPiyush Kumar
The ppt incorporates lots of animations for clear explanation on graphs and curves, it's better to download it first and then surely you will be cherished with it
This presentation basically tells how the firm makes decisions in a competitive market. To make concepts here more understable, I have prepared graphs and mathematical equations.
Comparative Economic Systems - Intro to Capitalism. Read about the Capitalism, its advantages and disadvantages. You will find it helpful in your studies. Don't forget to like and follow.
Equilibrium of Firm Under Perfect CompetitionPiyush Kumar
The ppt incorporates lots of animations for clear explanation on graphs and curves, it's better to download it first and then surely you will be cherished with it
Free Market Economy - Past, Present and FutureAyman Rahman
For better or worse, free market has been the dominant form of economic system throughout the world for the better part of the last three hundred years. Although the free market as a concept dates back to the days of Adam Smith, in practice its origins are much older.
Free markets have paved the way for global economic integration, contributing significantly to greater international trade and greater standards of living through the influence of bodies such as the WTO, World Bank and IMF. However, free markets have their fair share of opponents as well- since the late 90s, numerous anti-globalisation protests have taken place on the eve of important trade and economic summits.
What we have to figure out- "If not free market, then what?"
Free Market Economy - Past, Present and FutureAyman Rahman
For better or worse, free market has been the dominant form of economic system throughout the world for the better part of the last three hundred years. Although the free market as a concept dates back to the days of Adam Smith, in practice its origins are much older.
Free markets have paved the way for global economic integration, contributing significantly to greater international trade and greater standards of living through the influence of bodies such as the WTO, World Bank and IMF. However, free markets have their fair share of opponents as well- since the late 90s, numerous anti-globalisation protests have taken place on the eve of important trade and economic summits.
What we have to figure out- "If not free market, then what?"
Aggregate supply, also known as total output, is the total supply of goods and services produced within an economy at a given overall price in a given period.
151. 10 is shopping for mixers (capital) for his bakery. E.docxfelicidaddinwoodie
15
1.
10 is shopping for mixers (capital) for his bakery. Each mixer costs $40. Assume this is a perfectly competitive market.
a. Fill in the “Total Capital Cost” and “Marginal Resource Cost” columns in the table below.
Henry's Capital Cost
Capital
(mixers)
Total
Capital Cost
(dollars)
Marginal
Resource Cost
(dollars)
0
$0
—
1
$
2
3
4
5
6
7
b. Graph the marginal resource cost of capital for Henry's business.
Instructions: Use the tool provided 'MRC Curve' to plot the line point by point (7 points total).
2.
Henry can purchase mixers (capital) for his bakery, where he makes loaves of bread. The productivity and revenue generated by additional mixers is presented in the table below. Assume this is a perfectly competitive market.
Capital Productivity
Capital
(mixers)
Total
Product
(loaves of bread)
Marginal
Product
(loaves of bread)
Price
(dollars)
Total
Revenue
(dollars)
Marginal
Revenue Product
(dollars)
0
0
—
$5
$ 0
—
1
11
11
5
55
$55
2
20
9
5
100
45
3
28
8
5
140
40
4
34
6
5
170
30
5
38
4
5
190
20
6
40
2
5
200
10
7
41
1
5
205
5
a. Graph Henry's demand for capital based on the information in the table above. Draw the marginal resource cost (MRC) curve if the price for a mixer is $30.
Instructions: Use the tools provided 'Demand for Capital' and 'MRC Curve' to plot each line point by point (7 points total for each line).
b. How much capital does Henry demand given the current price of mixers?
5 mixers
4 mixers
3 mixers
2 mixers
3.
Billy is hiring workers to help him install solar panels. The table below presents the marginal product (in terms of solar panels installed per week) of various workers. Assume this is a perfectly competitive market.
Labor Productivity and Marginal Revenue Product for Solar Panel Installation
Labor
(workers)
Marginal
Product
(solar panels)
Marginal Revenue
Product
for P = $50
(dollars)
Marginal Revenue
Product
for P = $100
(dollars)
Marginal Revenue
Product
for P = $150
(dollars)
1
14
$
$
$
2
12
3
10
4
8
5
6
6
4
7
2
a. What is the marginal revenue product of each worker if the current market price to install one solar panel is $50? What if the current market price is $100? $150? Using the table above, fill in the “Marginal Revenue Product” columns.
b. Graph the three marginal revenue product curves (for prices of $50, $100, and $150) based on your answers to part a.
Instructions: Use the tools provided 'MRP (P = $50),' 'MRP (P = $100),' and 'MRP (P = $150)' to plot each line point by point (7 points total for each line).
4.
Alfonso wants to know what the cost of living would be in four different cities. He looks at circular ads from each of the cities and finds the prices of goods that he would normally buy during a typical trip to the grocery store each week. He adds up what he would pay for each grocery trip in the different cities and calls the sum “Price of Grocery Basket ...
Initial Conditions (25 points total) Consider a firm that ha.docxaltheaboyer
Initial Conditions (25 points total)
Consider a firm that has the following relationship between labor and output, i.e., a production function. Along this production function, we hold land, capital (K) and technology (total factor productivity) fixed. Fill in the following table (5 points).
TABLE 1
L
Q
MP
L
MRP
Marginal Profit
Total Profit
0
0
-
-
-
0
1
8
2
20
3
28
4
35
5
41
6
45
The current wage is $150 and the price of output (Q) = $20
.
[1]
(5 points for i through iv)
i.
The profit maximizing output is _______.
ii.
The profit maximizing level of labor input is ________ workers.
iii.
The maximum profit for this firm is __________.
iv.
What is the marginal revenue product of the 6
th
worker? ___________
b.
(10 points for correct and completely labeled diagram with points A, B, C, D) Draw the production function associated with the table above. Note, labor (L) is the variable on the horizontal axis and output (Q) is the variable on the vertical axis and locate this initial point as point A.
c.
(5 points) Now draw the W / MRP labor market diagram (associated with Table 1 above) as we did in lecture being sure to be clear on the areas that represent labor costs, MRP, and the marginal profit or loss – use the "smoothed out version" rather than the barchart version (use different colors if at all possible). You will need to draw a total of three of these 'initial conditions W / MRP la
bor market' diagrams (point A).
Be sure to watch the Homework 5 Explanation video in the Homework 5 folder in ANGEL for some guidance on the rest of the Homework Assignment.
We are now going to consider 3 different scenarios. We treat each scenario as independent events. You will start off with a new W / MRP labor market diagram for each scenario with these same initial conditions. Specifically, we start at point A and then depict and explain what happens when we go from scenario to scenario, much like we did in the lectures. That is, once we evaluate each scenario, we return back to the original conditions and then consider the next scenario.
Scenario # 1: (25 points total).
Suppose that due to favorable economic conditions, the price that this firm can sell its product for rises to $22. Fill in the following table. Solve for the new profit maximizing output and profit (5 points).
TABLE 2
L
Q
MP
L
MRP
Marginal Profit
Total Profit
0
0
-
-
-
0
1
8
2
20
3
28
4
35
5
41
6
45
The current wage is $150 and the
price of output (Q) = $22
.
a.
(5 points for i through iii)
i.
The profit maximizing output is _______.
ii.
The profit maximizing level of labor input is ________ workers.
iii.
The maximum profit for this firm is __________.
b.
Locate this change in conditions as point B on the production function you drew in part 1b above.
c.
(10 points for correct and completely labeled diagram with points A, B, C, and D)
Now construct a supply curve as we did in lec.
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
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when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
Resume
• Real GDP growth slowed down due to problems with access to electricity caused by the destruction of manoeuvrable electricity generation by Russian drones and missiles.
• Exports and imports continued growing due to better logistics through the Ukrainian sea corridor and road. Polish farmers and drivers stopped blocking borders at the end of April.
• In April, both the Tax and Customs Services over-executed the revenue plan. Moreover, the NBU transferred twice the planned profit to the budget.
• The European side approved the Ukraine Plan, which the government adopted to determine indicators for the Ukraine Facility. That approval will allow Ukraine to receive a EUR 1.9 bn loan from the EU in May. At the same time, the EU provided Ukraine with a EUR 1.5 bn loan in April, as the government fulfilled five indicators under the Ukraine Plan.
• The USA has finally approved an aid package for Ukraine, which includes USD 7.8 bn of budget support; however, the conditions and timing of the assistance are still unknown.
• As in March, annual consumer inflation amounted to 3.2% yoy in April.
• At the April monetary policy meeting, the NBU again reduced the key policy rate from 14.5% to 13.5% per annum.
• Over the past four weeks, the hryvnia exchange rate has stabilized in the UAH 39-40 per USD range.
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
Latino Buying Power - May 2024 Presentation for Latino CaucusDanay Escanaverino
Unlock the potential of Latino Buying Power with this in-depth SlideShare presentation. Explore how the Latino consumer market is transforming the American economy, driven by their significant buying power, entrepreneurial contributions, and growing influence across various sectors.
**Key Sections Covered:**
1. **Economic Impact:** Understand the profound economic impact of Latino consumers on the U.S. economy. Discover how their increasing purchasing power is fueling growth in key industries and contributing to national economic prosperity.
2. **Buying Power:** Dive into detailed analyses of Latino buying power, including its growth trends, key drivers, and projections for the future. Learn how this influential group’s spending habits are shaping market dynamics and creating opportunities for businesses.
3. **Entrepreneurial Contributions:** Explore the entrepreneurial spirit within the Latino community. Examine how Latino-owned businesses are thriving and contributing to job creation, innovation, and economic diversification.
4. **Workforce Statistics:** Gain insights into the role of Latino workers in the American labor market. Review statistics on employment rates, occupational distribution, and the economic contributions of Latino professionals across various industries.
5. **Media Consumption:** Understand the media consumption habits of Latino audiences. Discover their preferences for digital platforms, television, radio, and social media. Learn how these consumption patterns are influencing advertising strategies and media content.
6. **Education:** Examine the educational achievements and challenges within the Latino community. Review statistics on enrollment, graduation rates, and fields of study. Understand the implications of education on economic mobility and workforce readiness.
7. **Home Ownership:** Explore trends in Latino home ownership. Understand the factors driving home buying decisions, the challenges faced by Latino homeowners, and the impact of home ownership on community stability and economic growth.
This SlideShare provides valuable insights for marketers, business owners, policymakers, and anyone interested in the economic influence of the Latino community. By understanding the various facets of Latino buying power, you can effectively engage with this dynamic and growing market segment.
Equip yourself with the knowledge to leverage Latino buying power, tap into their entrepreneurial spirit, and connect with their unique cultural and consumer preferences. Drive your business success by embracing the economic potential of Latino consumers.
**Keywords:** Latino buying power, economic impact, entrepreneurial contributions, workforce statistics, media consumption, education, home ownership, Latino market, Hispanic buying power, Latino purchasing power.
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
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Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
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Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...
Factor market: Labor
1. There a two situations we are going to analyze Labor Markets:
1. Perfect Competition for a Good AND for the Labor to produce that good.
2. Imperfect Competition for a Good AND for the Labor to produce that good
We are going to look at Number 1 in this lesson.
2. “Perfectly Competitive Market for (1) the Product and (2) Labor
In a Perfectly Competitive Market for a Good the Price the firm receives is Constant
1. It can SELL all it produces for that constant price
2. The price is set in the Market for the good and the firm is a Price-Taker
3. The DEMAND for its good is Perfectly Elastic (horizontal)—the Firm can sell as
much as it can at the Market Price.
In a Perfectly Competitive Market for Labor the Price the Firm PAYS for Labor is Constant
1. It can HIRE (“buy”) all the workers it needs at a Constant Wage
2. The wage is set in the Market for Labor and the firm is a Wage-Taker
a. Think Fast Food workers.
3. The SUPPLY of labor is Perfectly Elastic (horizontal)—the Labor market SUPPLIES
all the workers the firm needs at the Market Wage
Labor is an INPUT that goes into the Production of an OUTPUT. Labor is a function/Factor of Production.
The DEMAND for an input like Labor is dependent on the DEMAND FOR THE OUTPUT (good/service)
So, the Demand for a factor like labor is called DERIVED DEMAND.
3. “Perfectly Competitive Market for (1) the Product and (2) Labor
(Table from Welkernomics)
Vocabulary:
1. Quantity of Labor (L)---the number of workers a firm could hire
2. Total Product (TP)---How much ALL workers contribute to Production
3. Marginal Product of Labor( MPL)---How much EACH worker contributes to the running total
4. Price of the Product (P)---In a Perfectly Competitive Market the Firm is a PRICE TAKER—Price Constant!
5. Marginal REVENUE Product of Labor (MRPL)---The dollar value of EACH WORKER Marginal Product.
MPL X P = MPL
Marginal Revenue Product of Labor (MRPL) is the same of Value Marginal Product of Labor (VMPL)
4. Firm Labor
MRPL
(W)
Quantity of Labor
$12
$10
$8
$6
$4
$2
$0
$-2
1 2 3 4 5 6 7 8
(Table from Welkernomics)
And so it begins…We first want to plot our
MRPL values. These values ALSO represent
Potential wages (“W”) an employer MIGHT be
Willing to pay a worker based on their PRODUCTIVITY and
The PRICE OF THE GOOD (more on that later)
12. Firm Labor
Quantity of Labor
$12
$10
$8
$6
$4
$2
$0
$-2
1 2 3 4 5 6 7 8
D* for Labor “D L”
Our DEMAND CURVE for Labor
Determined by the MRPL for each worker
(Table from Welkernomics)
MRPL
(W)
13. Firm Labor
Quantity of Labor
$12
$10
$8
$6
$4
$2
$0
$-2
1 2 3 4 5 6 7 8
D* for Labor “D L”
Getting a little ahead of myself, but if
the Wage Rate (determined in the
Market for Labor—we will get to that)
is $6.00 per hour, HOW MANY
WORKERS WILL IT HIRE? (hint: look at
the Marginal Revenue Product of
Labor column)
(Table from Welkernomics)
MRPL
(W)
14. Firm Labor
MRPL
Quantity of Labor
$12
$10
$8
$6
$4
$2
$0
$-2
1 2 3 4 5 6 7 8
D* for Labor “D L”
It will hire 6 workers…WHY?
The Profit Maximization Rule of Resource Employment
Marginal Resource Cost (MRC, aka Wage (w) = Marginal Revenue Product of Labor (MRPL)
MRC (w) = MRPL
(Table from Welkernomics)
15. Firm Labor
Quantity of Labor
$12
$10
$8
$6
$4
$2
$0
$-2
1 2 3 4 5 6 7 8
D* for Labor “D L”
(Table from Welkernomics)
It won’t want to pay $6.00 per hour to the
5th Worker, because that worker only contributes
$4.00 to Revenues. He/She costs more than he/she
brings in!
NO!!!
MRPL
(W)
“A”
16. Firm Labor
Quantity of Labor
$12
$10
$8
$6
$4
$2
$0
$-2
1 2 3 4 5 6 7 8
D* for Labor “D L”
(Table from Welkernomics)
You WANT to hire workers 1,2, and 3 FOR SURE
Because each of them produces revenue GREATER
than what the Firm pays them.
The Firm hires that 4th Worker because it will Maximize
Profits even though you pay him = to what he brings in.
HIRE UNTIL:
MRC (W) = MRPL
YES!!
MRPL
(W)
“A”
17. Market for Labor
Wage
(w)
Quantity of Labor
QL*
W* ($6.00
DL*
SL*
Assumption: the Firm is hiring in a “Perfectly Competitive Labor Market”. The firm
Can HIRE as many workers as it wants at the Wage Rate Set in the Market (graph on RIGHT).
In other words the market SUPPLIES workers to the firm at a rate of $6.00 per hour.
IMPORTANT POINT: The LABOR SUPPLY CURVE for the FIRM is Horizontal at the Market set
Wage Rate---The firm SUPPLY CURVE is PERFECTLY ELASTIC!!
“A”
18. Market for Labor
Wage
(w)
Quantity of Labor
QL*
W* ($6.00
DL*
SL*
Assumption: the Firm is hiring in a “Perfectly Competitive Labor Market”. The firm
Can HIRE as many workers as it wants at the Wage Rate Set in the Market (graph on RIGHT).
In other words the market SUPPLIES workers to the firm at a rate of $6.00 per hour.
IMPORTANT POINT: The LABOR SUPPLY CURVE for the FIRM is Horizontal at the Market set
Wage Rate---The firm SUPPLY CURVE is PERFECTLY ELASTIC!!
FIRM LABOR SUPPLY CURVE
“A”
19. Market for Labor
Wage
(w)
Quantity of Labor
QL*
W* ($6.00
DL*
SL*
FIRM LABOR SUPPLY CURVE
GOT THAT!!!! Ok, I will assume you do. Now…We want to divide and conquer.
Let’s isolate the Firm Labor Graph and look at what SHIFTS the Demand/MRPL Curve
Oh, you thought it was going to be easy???
20. SL*
Focus only on the D*=MRPL* curve. The Marginal Revenue Product of Labor was
Calculated by taking Marginal Product (MP) and multiplying it by Price (P). Right?
So, MRPL can change IF: Marginal Product (MP) changes and/or Price (P) changes.
“A”
21. SL*
Let’s start with a change in Marginal Product (MP) and keep it simple. What allows a
Worker to be MORE productive now and in the future?
1. Education/Training/Skills/Processes (efficiencies)
2. Technology/Capital Equipment.
“A”
22. SL*
So, anything that allows a worker to produce MORE than they did before will INCREASE
Their MARGINAL PRODUCT.
***All else equal and the Price of the good does not change then an increase in MP will
INCREASE Marginal Revenue Product of Labor (MRPL)***
“A”
23. Assume the Firm employs additional Capital, provides training to workers, or
in some other way increases the efficiency level to produce.
Assume this allows EACH worker to produce an additional 2 Units of the good each hour.
See the chart above as I add to more units to the Marginal Product, then
Change the Marginal Revenue Product of Labor for each worker.
PRICE X MARGINAL PRODUCT = MARGINAL REVENUE PRODUCT OF LABOR
8
7
6
5
4
3
2
1
$16
$14
$12
$10
$8
$6
$4
$2
26. SL*
$16
D1 = MRPL1
Notice we are at a NEW equilibrium, Point
“B”. The wage DID NOT CHANGE but the
number of workers the firm can hire at
$6.00 per hour has INCREASED to 6!
“B”“A”
27. SL*
$16
D1 = MRPL1
***When PRODUCTIVITY
INCREASES the MRP of Labor
Curve shifts to the RIGHT and the
firm can hire more workers.
“B”“A”
28. SL*
$16
Ok, let’s start over and change the Price.
Assume the Price the Perfectly
Competitive Firm receives for the Good
INCREASES to $3.00.
“A”
$3
$3
$3
$3
$3
$3
$3
$3
29. SL*
$16
Now re-calculate MRP of Labor
by taking MP X New Price.
“A”
$3
$3
$3
$3
$3
$3
$3
$3 $18
$15
$12
$9
$6
$3
$0
-$3
30. SL*
$16
D1 = MRPL1
If we plot these MRP of Labor
points we get a new MRPL curve
that lies to the RIGHT of the old
one and the NEW equilibrium
point is “B” at 5 workers.
“B”“A”
$3
$3
$3
$3
$3
$3
$3
$3 $18
$15
$12
$9
$6
$3
$0
-$3
31. Bottom Line on Shifting the MRP of
Labor Curve
• An increase in Productivity will Shift it to the RIGHT
allowing the firm to hire MORE workers.
• An increase in the Price will shift it to the RIGHT
allowing the firm to hire MORE workers.
• A decrease in Productivity will Shift it to the LEFT and
FEWER workers will be hired
• A decrease in the Price will Shift it to the LEFT and
FEWER workers will be hired.
32. What happens when there is a change
in the MARKET WAGE??
• In the Market for Labor things can change to
either affect the Demand for Labor and/or the
Supply of Labor.
• Let’s look at how the Firm responds to
changes in the Wage that they have NO
control over (ceterus paribus assumption)
33. Market for Labor
Wage
(w)
Quantity of Labor
QL*
W* ($6.00
DL*
SL*
Look at the Market for Labor graph on the RIGHT. There are TWO things that could cause the Wage
Rate to INCREASE.
1. An INCREASE in DEMAND for Labor shifting the Demand curve to the RIGHT
2. A DECREASE in SUPPLY of Labor shifting the Supply curve to the LEFT
“A” “A”
34. Market for Labor
Wage
(w)
Quantity of Labor
QL*
W* ($6.00
DL*
SL*
Let’s shift the Demand Curve to the RIGHT suggesting there is an INCREASE in Demand for Labor in
This market.
The NEW MARKET WAGE IS $10.00
“A”
DL 1
QL 1
W1 ($10)
“B”
35. Market for Labor
Wage
(w)
Quantity of Labor
QL*
W* ($6.00
DL*
SL*
Because the Firm is a Wage Taker, the Firm Supply Curve for Labor SHIFTS UP!
“A”
DL 1
QL 1
W1 ($10)
“A”
“B”
36. Market for Labor
Wage
(w)
Quantity of Labor
QL*
W* ($6.00
DL*
SL*
Now, the Firm has to look at how this new wage matches up with its own
Labor Demand curve---D* = MRPL*
Remember the Profit Maximizing Quantity of Labor:
MRC (W) = MRPL
The firm now finds that only 2 workers will be necessary.
“A”
DL 1
QL 1
W1 ($10)
“B” “B”
“A”
37. Market for Labor
Wage
(w)
Quantity of Labor
QL*
W* ($6.00
DL*
SL*
Now, look at how the firm responds if there is a DECREASE in the Market Wage.
This could happen if:
1. Demand for Labor DECREASES
2. Supply of Labor INCREASES
“A” “A”
38. Market for Labor
Wage
(w)
Quantity of Labor
QL*
W* ($6.00
DL*
SL*
Let’s shift the Demand Curve to the LEFT suggesting there is an DECREASE in Demand for Labor in
This market.
The NEW MARKET WAGE IS $4.00
“A”
DL 1
QL 1
W1 ($4.00)
“B”
39. Market for Labor
Wage
(w)
Quantity of Labor
QL*
W* ($6.00
DL*
SL*
The Firm is a Wage Taker so the new Firm Supply Curve will shift DOWN.
There is a new equilibrium in on the FIRM graph where:
MRC ($4.00/hour) = MRPL ($4.00)
The firm will INCREASE hiring to 5 Workers
“A”
DL 1
QL 1
W1 ($4.00)
“B”
“B”
40. Bottom Line
• If the firm is hiring in a Perfectly Competitive Labor Market:
• It will hire more workers if the wage decreases
• It will hire fewer workers if the wage increases
CETERUS PARIBUS!!
If wage rate increases, as in a higher minimum wage this can
be offset by what we learned prior to this:
If those workers become MORE productive and/or the Price of
the good they produce INCREASES.
This is an important part of the debate about increasing the
Minimum Wage.