Labor Demand The Labor Market
|
|
- Phillip Floyd
- 7 years ago
- Views:
Transcription
1 Labor Demand The Labor Market 1. Labor demand 2. Labor supply Assumptions Hold capital stock fixed (for now) Workers are all alike. We are going to ignore differences in worker s aptitudes, skills, ambition and so on Labor market equilibrium ignoring unemployment 4. Unemployment 5. Europe and the U.S. 6. Discrimination 2 Labor market is competitive. Firms view the wage of the workers they hire as being determined in a competitive market labor market and not set by the firms themselves. (No monopsony power.) Firms are perfectly competitive in the product market (No monopoly power.) Firms maximize profits. A firm s profit is the difference between its revenue and its costs: π(q) =R(Q) C(Q) 3 where π(q) = profits R(Q) = total revenue C(Q) = total economic cost A firm in perfectly competitive environment revenue is price times output: R(Q) =P Q. Recall that we have worked with a production function: Q = F (K, L) where Q = output K = productive services of capital L = labor 4 Note that outputs and inputs are measure per units of period of time. That is Output is in number of units production per month, quarter, or year. Labor is measured in hours per week, month or year or in workers per week, month or year Marginal product of labor (MPL) change in output MPL = change in labor input = Δq ΔL The marginal product of labor measure the productivity of the last incremental increase in labor. F is a function.
2 Recall we write the total cost as C = w L + r K Analysis at the margin. A firm compares the costs and benefits of hiring one extra worker. If the real wage(w) is greater than the marginal product of labor (MPL), the firm is paying the marginal worker more than the worker produces, so a profit-maximizing firm will reduce the number workers to increase profits. If w<mpl, the marginal worker produces more than he or she is being paid, so a profit maximizing firm will increase the number of workers. The labor demand schedule specifies how many units of labor (such as man-hours) firms would hypothetically like to hire at any given prevailing wage. The labor demand curve is the MPL curve. Labor demand schedule slopes downward: firms want fewer workers and a shorter workweek when the real wage is high. 5 So we rewrite the firm s profits as: π(l) =P F (K, L) (w L + r K) So the firm wants find the choose the level of output to maximize profits. It chooses this level of output by choosing how much labor to hire. Plot P F (K, L) and (w L + r K) as functions of L. Profits are maximized where the slope of the profit function is zero Δπ(L) ΔL = P ΔQ ΔL ΔC(Q) ΔL =0 ΔF (K, L) = P w =0 ΔL = P MPL w =0 So profits are maximized when P MPL = w. 6 Labor Supply - The Income-Leisure Tradeoff Utility depends on consumption, C and leisure, l: Utility = U(C, l) 7 Comparative Statics Labor demand shifts out when P increases MPL increases Labor demand shifts out when P decreases MPL decreases 8 Need to compare the costs and benefits of working an additional day. Cost: loss of leisure time benefit: more consumption, since income is higher Let s be a little more specific. Resources of an individual and prices the individual faces: L s = time spent work (i.e labor supplied) h = total hours in a day w = real wage Φ = real non-labor wealth or profits
3 Time constraint l + L s = h So the budget constraint of this individual is C = wn s +Φ C = w(h l)+φ Comparative Statics An increase in Φ So suppose you win the lottery. What would happen to your supply of labor? What would happen to your demand for leisure? For most people, they would probably demand more leisure. In other words, leisure is a normal good for most people. 9 We can graph a person s preferences for consumption leisure using indifference curves. The optimal choice occurs where the marginal rate of substitution - the tradeoff between consumption and leisure equals the real wage. The value of the extra consumption to the person from working a little more just has to be equal to value of the lost leisure that it takes to generate the consumption. The real wage is the amount of consumption that this person can purchase if she gives up an hour of leisure. 10 There are two effects an income effect and a substitution effect. The income effect is the tendency of workers to supply less labor in response to become wealthier. The substitution effect is the tendency of workers to supply more labor in response to a higher real wage. An increase in the real wage shifts the budget constraint. The kink in the constraint remains fixed, and the budget constraint becomes steeper. Consumption will increase, but leisure may rise or fall, because of the opposing substitution and income effects. The substitution effect captures the movement along the indifference curve in response to the increase in the real wage. The real wage has increased so the relative cost of leisure has risen relative to consumption. The income effect holds the real wage constant. Note an increase in non-labor income, Φ has a pure income effect, with no substitution effect. Which effect will dominate? In general, as countries become wealthier, its citizen supply less labor. But in the short run the substitution effect dominates. As we said, this implies an upward sloping supply curve for labor. 11 An increase in the wage rate, w When the wage rate rises the leisure become more expensive, which by itself leads people to want less of it (the substitution effect). If leisure is a normal good, we would then predict that an increase in the wage rate would lead to a decrease in the demand for leisure and thus an increase in the supply of labor. A normal good must a negative sloped demand curve. If leisure is a normal good, then the supply curve of labor must be positively sloped. But wait there is a problem with the analysis. At an intuitive level, it may not seem reasonable that an increase in the wage rate would always lead to an increase in the supply of labor. If my wage becomes very high I might spend some of extra income consuming leisure. Get a backward bending supply curve for labor. 12
4 The aggregate labor supply curve 13 The aggregate labor supply curve is the sum of the labor supplied by everyone in the economy. The aggregate labor supply schedule specifies how many units of labor households would hypothetically wish to provide at any given prevailing current wage, holding all other variables constant. Aggregate labor supply slopes upward. In general, workers are willing to supply more man-hours at a higher real wage. A main determinant of labor supply is demographics (working age population, immigration, fertility) An outward shift in the labor supply curve means that households wish to provide more labor than previously at every hypothetical wage level. 14 The labor supply curve shifts out when: lifetime wealth decreases (a lot like a change in Φ) increase in the working age population The labor supply curve shifts in when: lifetime wealth increases decrease in the working age population Note that one possible source of an increase in lifetime wealth is an increase in a worker s expected future wages. Frictional Unemployment Labor market equilibrium ignoring unemployment Problem with supply and demand model above. No worker who wishes to work another hour at the prevailing wage w is unable to find an employer. Unemployment (defined as people looking for work but not working) would be zero! How can this be? Supply and demand is a useful way of thinking about the determination of w and N but doesn t tell the whole story. Example: Landlords and tenants - if a tenant leaves suddenly, the landlord does not usually rent the apartment right away. Normal, efficient matching of tenants to apartments takes a little time. The landlord could rent the place out right away. The landlord could drop the price below the market value. The landlord could take the first person who comes by to look at it. But this is not always the optimal thing to do. It is a good idea to be a little choosy. With constant turnover, there will always be a percentage of apartments that are vacant even though the landlords are willing to rent them at the going rental rate. 15 The hours demanded by firms and the hours workers supply reach equality at the intersection of the labor demand and labor supply curve denoted ( w, L). If w< w firms wish to hire more workers than are willing to work. Firms bid up the real wage w to attract workers. If w> w firms find more workers willing to work than firms care to hire. Jobseekers drive down the real wage. Upshot: the labor market moves toward equilibrium ( w, L). 16
5 Structural Unemployment 17 This shows up in almost every market we use supply and demand to analyze. In labor markets, such unemployment is called frictional unemployment. Not all unemployment is bad or inefficient. You often hear people say unemployment represents wasted resources. But looking for the right job or the right employee is no more of a waste then looking for the right apartment or looking for the right tenant. You rarely rent the first apartment you look at that is in your price range. It is important that capital and labor are in the place for efficient production. Taking the time to make labor is in the right place can be time well spent. This is one of the reasons governments offer unemployment insurance. As a society we want to make sure resources are allocated efficiently. We don t want people necessarily taking the first job that comes along just so they can pay their bills. Unemployment insurance allows job-seekers some time to find the right job, not just the first job. 18 The structural unemployed are the chronically unemployed. There are unemployed people without the skills to get and hold a job. There are a large number of people in this country who have such low job skills that they may not even understand that when a shift is from 9 to 5, that means you have arrive at nine o clock and you don t get to leave until five o clock. For these folks, the reason they are unemployed is not because they can t find the right job, it is that is hard to find someone willing to hire these folks at any wage. Often these people are not counted as unemployed since they become discouraged a drop out of the labor force all together. Can all unemployment be explained as frictional or structural? Hard to argue that the Great Depression was just friction and structural unemployment. Currently the unemployment rate in 4.8%; most of that (but certainly not all) is probably frictional and structural unemployment. But unemployment is a difficult thing to measure. So most business economists (e.g. Wall Street, the Fed) focus on employment growth rather than the unemployment rate. Why do we work so much harder than the Europeans? 19 Cyclical Unemployment These are the folks who are unemployed due to recessions. That is macro topic so we will leave that for Econ The typical U.S. worker (between the ages for 15 and 64) works 1,820 hours per year. The typical German works 1,480 and the typical French works 1,467. Three explanations Taste Taxes Coordination
6 Economics of Discrimination So far we have assumed that workers are all alike. But to the extent that personal traits affect job productivity such as intelligence, ability, strength, schooling, occupational training, and health differ systematically among age-race-sex groups in the population, so will earning capacity. younger workers make better football players young attractive women make for better celebrities than old fat balding middle age men What about the situation where labor market groups such as women and blacks have low earning power relative to to white males even if we account for productivity differences? We term this labor market discrimination. This is the case that the demand for labor for certain groups in lower for every given wage rate Why might firms discriminate? Some employers might have a distaste for associating with certain groups. Clients of the firm may have a distaste for associating with certain groups (Robert Barro does not like his flight attendants to be male!) Employers might collude in order to increase profits at the expense of certain groups. Employers might have incorrect information concerning the true productive capabilities of certain groups. Discrimination can also affect the labor supply curve Certain groups may be restricted (or feel restricted) to obtain job skills In particular, if certain groups perceive the return on obtaining jobs skills is lower, they may be less likely obtain the skills. Articles in the reading packet focus of discrimination due to names and looks. In particular, do hunky profs get better teaching evaluations? We could devote an entire course to this issue. 23
Microeconomics Instructor Miller Practice Problems Labor Market
Microeconomics Instructor Miller Practice Problems Labor Market 1. What is a factor market? A) It is a market where financial instruments are traded. B) It is a market where stocks and bonds are traded.
More informationCHAPTER 13 MARKETS FOR LABOR Microeconomics in Context (Goodwin, et al.), 2 nd Edition
CHAPTER 13 MARKETS FOR LABOR Microeconomics in Context (Goodwin, et al.), 2 nd Edition Chapter Summary This chapter deals with supply and demand for labor. You will learn about why the supply curve for
More informationPOTENTIAL OUTPUT and LONG RUN AGGREGATE SUPPLY
POTENTIAL OUTPUT and LONG RUN AGGREGATE SUPPLY Aggregate Supply represents the ability of an economy to produce goods and services. In the Long-run this ability to produce is based on the level of production
More informationPractice Problem Set 2 (ANSWERS)
Economics 370 Professor H.J. Schuetze Practice Problem Set 2 (ANSWERS) 1. See the figure below, where the initial budget constraint is given by ACE. After the new legislation is passed, the budget constraint
More informationChapter 3 Productivity, Output, and Employment
Chapter 3 Productivity, Output, and Employment Multiple Choice Questions 1. A mathematical expression relating the amount of output produced to quantities of capital and labor utilized is the (a) real
More informationLECTURE NOTES ON MACROECONOMIC PRINCIPLES
LECTURE NOTES ON MACROECONOMIC PRINCIPLES Peter Ireland Department of Economics Boston College peter.ireland@bc.edu http://www2.bc.edu/peter-ireland/ec132.html Copyright (c) 2013 by Peter Ireland. Redistribution
More informationFor instance between 1960 and 2000 the average hourly output produced by US workers rose by 140 percent.
Causes of shifts in labor demand curve The labor demand curve shows the value of the marginal product of labor as a function of quantity of labor hired. Using this fact, it can be seen that the following
More informationProblem Set #5-Key. Economics 305-Intermediate Microeconomic Theory
Problem Set #5-Key Sonoma State University Economics 305-Intermediate Microeconomic Theory Dr Cuellar (1) Suppose that you are paying your for your own education and that your college tuition is $200 per
More informationECON 443 Labor Market Analysis Final Exam (07/20/2005)
ECON 443 Labor Market Analysis Final Exam (07/20/2005) I. Multiple-Choice Questions (80%) 1. A compensating wage differential is A) an extra wage that will make all workers willing to accept undesirable
More informationChapter 6 MULTIPLE-CHOICE QUESTIONS
Chapter 6 MULTIPLE-CHOICE QUETION 1. Which one of the following is generally considered a characteristic of a perfectly competitive labor market? a. A few workers of varying skills and capabilities b.
More informationPre-Test Chapter 25 ed17
Pre-Test Chapter 25 ed17 Multiple Choice Questions 1. Refer to the above graph. An increase in the quantity of labor demanded (as distinct from an increase in demand) is shown by the: A. shift from labor
More information4. Answer c. The index of nominal wages for 1996 is the nominal wage in 1996 expressed as a percentage of the nominal wage in the base year.
Answers To Chapter 2 Review Questions 1. Answer a. To be classified as in the labor force, an individual must be employed, actively seeking work, or waiting to be recalled from a layoff. However, those
More informationProfit Maximization. 2. product homogeneity
Perfectly Competitive Markets It is essentially a market in which there is enough competition that it doesn t make sense to identify your rivals. There are so many competitors that you cannot single out
More information1 The Market for Factors of Production Factors of Production are the inputs used to produce goods and services. The markets for these factors of production are similar to the markets for goods and services
More information7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Key Concepts
Chapter 7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Key Concepts Aggregate Supply The aggregate production function shows that the quantity of real GDP (Y ) supplied depends on the quantity of labor (L ),
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
MBA 640 Survey of Microeconomics Fall 2006, Quiz 6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly is best defined as a firm that
More informationChapter 7: Classical-Keynesian Controversy John Petroff
Chapter 7: Classical-Keynesian Controversy John Petroff The purpose of this topic is show two alternative views of the business cycle and the major problems of unemployment and inflation. The classical
More informationI d ( r; MPK f, τ) Y < C d +I d +G
1. Use the IS-LM model to determine the effects of each of the following on the general equilibrium values of the real wage, employment, output, the real interest rate, consumption, investment, and the
More informationTHE ECONOMY AT FULL EMPLOYMENT. Objectives. Production and Jobs. Objectives. Real GDP and Employment. Real GDP and Employment CHAPTER
THE ECONOMY AT 29 FULL EMPLOYMENT CHAPTER Objectives After studying this chapter, you will able to Describe the relationship between the quantity of labour employed and real GDP Explain what determines
More informationI. Introduction to Aggregate Demand/Aggregate Supply Model
University of California-Davis Economics 1B-Intro to Macro Handout 8 TA: Jason Lee Email: jawlee@ucdavis.edu I. Introduction to Aggregate Demand/Aggregate Supply Model In this chapter we develop a model
More informationNotes - Gruber, Public Finance Chapter 20.3 A calculation that finds the optimal income tax in a simple model: Gruber and Saez (2002).
Notes - Gruber, Public Finance Chapter 20.3 A calculation that finds the optimal income tax in a simple model: Gruber and Saez (2002). Description of the model. This is a special case of a Mirrlees model.
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Suvey of Macroeconomics, MBA 641 Fall 2006, Final Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Modern macroeconomics emerged from
More informationEmployment and Pricing of Inputs
Employment and Pricing of Inputs Previously we studied the factors that determine the output and price of goods. In chapters 16 and 17, we will focus on the factors that determine the employment level
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) It is efficient to produce an additional shirt if A) the marginal benefit of producing the shirt
More informationThe fundamental question in economics is 2. Consumer Preferences
A Theory of Consumer Behavior Preliminaries 1. Introduction The fundamental question in economics is 2. Consumer Preferences Given limited resources, how are goods and service allocated? 1 3. Indifference
More informationBADM 527, Fall 2013. Midterm Exam 2. Multiple Choice: 3 points each. Answer the questions on the separate bubble sheet. NAME
BADM 527, Fall 2013 Name: Midterm Exam 2 November 7, 2013 Multiple Choice: 3 points each. Answer the questions on the separate bubble sheet. NAME 1. According to classical theory, national income (Real
More informationEcon 102 Aggregate Supply and Demand
Econ 102 ggregate Supply and Demand 1. s on previous homework assignments, turn in a news article together with your summary and explanation of why it is relevant to this week s topic, ggregate Supply
More informationTHIRD EDITION. ECONOMICS and. MICROECONOMICS Paul Krugman Robin Wells. Chapter 19. Factor Markets and Distribution of Income
THIRD EDITION ECONOMICS and MICROECONOMICS Paul Krugman Robin Wells Chapter 19 Factor Markets and Distribution of Income WHAT YOU WILL LEARN IN THIS CHAPTER How factors of production resources like land,
More informationCHAPTER 7: AGGREGATE DEMAND AND AGGREGATE SUPPLY
CHAPTER 7: AGGREGATE DEMAND AND AGGREGATE SUPPLY Learning goals of this chapter: What forces bring persistent and rapid expansion of real GDP? What causes inflation? Why do we have business cycles? How
More informationINTRODUCTION THE LABOR MARKET LABOR SUPPLY INCOME VS. LEISURE THE SUPPLY OF LABOR
INTRODUCTION Chapter 15 THE LBOR MRKET This chapter covers why there are differences in wages: How do people decide how much time to spend working? What determines the wage rate an employer is willing
More informationHealth Economics Demand for health capital Gerald J. Pruckner University of Linz & Lecture Notes, Summer Term 2010 Demand for health capital 1 / 31
Health Economics Demand for health capital University of Linz & Gerald J. Pruckner Lecture Notes, Summer Term 2010 Demand for health capital 1 / 31 An individual s production of health The Grossman model:
More informationLABOR UNIONS. Appendix. Key Concepts
Appendix LABOR UNION Key Concepts Market Power in the Labor Market A labor union is an organized group of workers that aims to increase wages and influence other job conditions. Craft union a group of
More informationTHE MARKET OF FACTORS OF PRODUCTION
THE MARKET OF FACTORS OF PRODUCTION The basis of the economy is the production of goods and services. Economics distinguishes between 3 factors of production which are used in the production of goods:
More informationANSWERS TO END-OF-CHAPTER QUESTIONS
ANSWERS TO END-OF-CHAPTER QUESTIONS 9-1 Explain what relationships are shown by (a) the consumption schedule, (b) the saving schedule, (c) the investment-demand curve, and (d) the investment schedule.
More informationECON 3312 Macroeconomics Exam 3 Fall 2014. Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
ECON 3312 Macroeconomics Exam 3 Fall 2014 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Everything else held constant, an increase in net
More informationThe Circular Flow of Income and Expenditure
The Circular Flow of Income and Expenditure Imports HOUSEHOLDS Savings Taxation Govt Exp OTHER ECONOMIES GOVERNMENT FINANCIAL INSTITUTIONS Factor Incomes Taxation Govt Exp Consumer Exp Exports FIRMS Capital
More informationChapter 12 Unemployment and Inflation
Chapter 12 Unemployment and Inflation Multiple Choice Questions 1. The origin of the idea of a trade-off between inflation and unemployment was a 1958 article by (a) A.W. Phillips. (b) Edmund Phelps. (c)
More informationChapter 13. Aggregate Demand and Aggregate Supply Analysis
Chapter 13. Aggregate Demand and Aggregate Supply Analysis Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics In the short run, real GDP and
More informationThe Cost of Production
The Cost of Production 1. Opportunity Costs 2. Economic Costs versus Accounting Costs 3. All Sorts of Different Kinds of Costs 4. Cost in the Short Run 5. Cost in the Long Run 6. Cost Minimization 7. The
More informationMacroeconomics 2301 Potential questions and study guide for exam 2. Any 6 of these questions could be on your exam!
Macroeconomics 2301 Potential questions and study guide for exam 2 Any 6 of these questions could be on your exam! 1. GDP is a key concept in Macroeconomics. a. What is the definition of GDP? b. List and
More informationGovernment Budget and Fiscal Policy CHAPTER
Government Budget and Fiscal Policy 11 CHAPTER The National Budget The national budget is the annual statement of the government s expenditures and tax revenues. Fiscal policy is the use of the federal
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chapter 11 Monopoly practice Davidson spring2007 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly industry is characterized by 1) A)
More informationChapter 4. Specific Factors and Income Distribution
Chapter 4 Specific Factors and Income Distribution Introduction So far we learned that countries are overall better off under free trade. If trade is so good for the economy, why is there such opposition?
More informationDemand, Supply, and Market Equilibrium
3 Demand, Supply, and Market Equilibrium The price of vanilla is bouncing. A kilogram (2.2 pounds) of vanilla beans sold for $50 in 2000, but by 2003 the price had risen to $500 per kilogram. The price
More informationMEASURING A NATION S INCOME
10 MEASURING A NATION S INCOME WHAT S NEW IN THE FIFTH EDITION: There is more clarification on the GDP deflator. The Case Study on Who Wins at the Olympics? is now an FYI box. LEARNING OBJECTIVES: By the
More informationCHAPTER 8. Practise Problems
CHAPTER 8 Practise Problems 1. The labor force is: A) the total of people employed. B) the total population. C) the total of the population of working age. D) the total of people employed and unemployed.
More informationTheoretical Tools of Public Economics. Part-2
Theoretical Tools of Public Economics Part-2 Previous Lecture Definitions and Properties Utility functions Marginal utility: positive (negative) if x is a good ( bad ) Diminishing marginal utility Indifferences
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chap 13 Monopolistic Competition and Oligopoly These questions may include topics that were not covered in class and may not be on the exam. MULTIPLE CHOICE. Choose the one alternative that best completes
More informationConsumers face constraints on their choices because they have limited incomes.
Consumer Choice: the Demand Side of the Market Consumers face constraints on their choices because they have limited incomes. Wealthy and poor individuals have limited budgets relative to their desires.
More information8 THE ECONOMY AT FULL EMPLOYMENT: THE CLASSICAL MODEL* * Chapter Key Ideas. Outline
C h a p t e r 8 THE ECONOMY AT FULL EMPLOYMENT: THE CLASSICAL MODEL* * Chapter Key Ideas Outline Our Economy s Anchor A. The economy is like a boat on a rolling sea. Potential GDP provides an anchor for
More informationAn increase in the number of students attending college. shifts to the left. An increase in the wage rate of refinery workers.
1. Which of the following would shift the demand curve for new textbooks to the right? a. A fall in the price of paper used in publishing texts. b. A fall in the price of equivalent used text books. c.
More informationNoah Williams Economics 312. University of Wisconsin Spring 2013. Midterm Examination Solutions
Noah Williams Economics 31 Department of Economics Macroeconomics University of Wisconsin Spring 013 Midterm Examination Solutions Instructions: This is a 75 minute examination worth 100 total points.
More informationStudy Questions for Chapter 9 (Answer Sheet)
DEREE COLLEGE DEPARTMENT OF ECONOMICS EC 1101 PRINCIPLES OF ECONOMICS II FALL SEMESTER 2002 M-W-F 13:00-13:50 Dr. Andreas Kontoleon Office hours: Contact: a.kontoleon@ucl.ac.uk Wednesdays 15:00-17:00 Study
More informationHomework #5: Answers. b. How can land rents as well as total wages be shown in such a diagram?
Homework #5: Answers Text questions, hapter 6, problems 1-4. Note that in all of these questions, the convention in the text, whereby production of food uses land and labor, and clothing uses capital and
More informationNatural Resources and International Trade
Department of Economics University of Roma Tre Academic year: 2013 2014 Natural Resources and International Trade Instructors: Prof. Silvia Nenci Prof. Luca Salvatici silvia.nenci@uniroma3.it luca.salvatici@uniroma3.it
More informationLECTURE NOTES ON MACROECONOMIC PRINCIPLES
LECTURE NOTES ON MACROECONOMIC PRINCIPLES Peter Ireland Department of Economics Boston College peter.ireland@bc.edu http://www2.bc.edu/peter-ireland/ec132.html Copyright (c) 2013 by Peter Ireland. Redistribution
More information4 THE MARKET FORCES OF SUPPLY AND DEMAND
4 THE MARKET FORCES OF SUPPLY AND DEMAND IN THIS CHAPTER YOU WILL Learn what a competitive market is Examine what determines the demand for a good in a competitive market Chapter Overview Examine what
More informationTheory of Demand. ECON 212 Lecture 7. Tianyi Wang. Winter 2013. Queen s Univerisity. Tianyi Wang (Queen s Univerisity) Lecture 7 Winter 2013 1 / 46
Theory of Demand ECON 212 Lecture 7 Tianyi Wang Queen s Univerisity Winter 2013 Tianyi Wang (Queen s Univerisity) Lecture 7 Winter 2013 1 / 46 Intro Note: Quiz 1 can be picked up at Distribution Center.
More informationEcon 116 Mid-Term Exam
Econ 116 Mid-Term Exam Part 1 1. True. Large holdings of excess capital and labor are indeed bad news for future investment and employment demand. This is because if firms increase their output, they will
More informationThe Theory of Investment
CHAPTER 17 Modified for ECON 2204 by Bob Murphy 2016 Worth Publishers, all rights reserved IN THIS CHAPTER, YOU WILL LEARN: leading theories to explain each type of investment why investment is negatively
More informationAP Microeconomics Chapter 12 Outline
I. Learning Objectives In this chapter students will learn: A. The significance of resource pricing. B. How the marginal revenue productivity of a resource relates to a firm s demand for that resource.
More informationManagerial Economics Prof. Trupti Mishra S.J.M. School of Management Indian Institute of Technology, Bombay. Lecture - 13 Consumer Behaviour (Contd )
(Refer Slide Time: 00:28) Managerial Economics Prof. Trupti Mishra S.J.M. School of Management Indian Institute of Technology, Bombay Lecture - 13 Consumer Behaviour (Contd ) We will continue our discussion
More informationChapter 6 Economic Growth
Chapter 6 Economic Growth 1 The Basics of Economic Growth 1) The best definition for economic growth is A) a sustained expansion of production possibilities measured as the increase in real GDP over a
More informationFISCAL POLICY* Chapter. Key Concepts
Chapter 11 FISCAL POLICY* Key Concepts The Federal Budget The federal budget is an annual statement of the government s expenditures and tax revenues. Using the federal budget to achieve macroeconomic
More informationLECTURE NOTES ON MACROECONOMIC PRINCIPLES
LECTURE NOTES ON MACROECONOMIC PRINCIPLES Peter Ireland Department of Economics Boston College peter.ireland@bc.edu http://www2.bc.edu/peter-ireland/ec132.html Copyright (c) 2013 by Peter Ireland. Redistribution
More informationChapter. Perfect Competition CHAPTER IN PERSPECTIVE
Perfect Competition Chapter 10 CHAPTER IN PERSPECTIVE In Chapter 10 we study perfect competition, the market that arises when the demand for a product is large relative to the output of a single producer.
More informationLabor Supply. Chapter. It s true hard work never killed anybody, but I figure, why take the chance? Ronald Reagan
2 Chapter Labor Supply It s true hard work never killed anybody, but I figure, why take the chance? Ronald Reagan Each of us must decide whether to work and, once employed, how many hours to work. At any
More informationchapter Perfect Competition and the >> Supply Curve Section 3: The Industry Supply Curve
chapter 9 The industry supply curve shows the relationship between the price of a good and the total output of the industry as a whole. Perfect Competition and the >> Supply Curve Section 3: The Industry
More informationAssignment #3. ECON 410.502 Macroeconomic Theory Spring 2010 Instructor: Guangyi Ma. Notice:
ECON 410.502 Macroeconomic Theory Spring 2010 Instructor: Guangyi Ma Assignment #3 Notice: (1) There are 25 multiple-choice problems and 2 analytic (short-answer) problems. This assignment is due on March
More informationThe Central Idea CHAPTER 1 CHAPTER OVERVIEW CHAPTER REVIEW
CHAPTER 1 The Central Idea CHAPTER OVERVIEW Economic interactions involve scarcity and choice. Time and income are limited, and people choose among alternatives every day. In this chapter, we study the
More informationTopic 1 - Introduction to Labour Economics. Professor H.J. Schuetze Economics 370. What is Labour Economics?
Topic 1 - Introduction to Labour Economics Professor H.J. Schuetze Economics 370 What is Labour Economics? Let s begin by looking at what economics is in general Study of interactions between decision
More informationChapter 13 Real Business Cycle Theory
Chapter 13 Real Business Cycle Theory Real Business Cycle (RBC) Theory is the other dominant strand of thought in modern macroeconomics. For the most part, RBC theory has held much less sway amongst policy-makers
More informationA. a change in demand. B. a change in quantity demanded. C. a change in quantity supplied. D. unit elasticity. E. a change in average variable cost.
1. The supply of gasoline changes, causing the price of gasoline to change. The resulting movement from one point to another along the demand curve for gasoline is called A. a change in demand. B. a change
More informationThe Aggregate Demand- Aggregate Supply (AD-AS) Model
The AD-AS Model The Aggregate Demand- Aggregate Supply (AD-AS) Model Chapter 9 The AD-AS Model addresses two deficiencies of the AE Model: No explicit modeling of aggregate supply. Fixed price level. 2
More informationCosumnes River College Principles of Macroeconomics Problem Set 11 Will Not Be Collected
Name: Solutions Cosumnes River College Principles of Macroeconomics Problem Set 11 Will Not Be Collected Fall 2015 Prof. Dowell Instructions: This problem set will not be collected. You should still work
More informationAgenda. Productivity, Output, and Employment, Part 1. The Production Function. The Production Function. The Production Function. The Demand for Labor
Agenda Productivity, Output, and Employment, Part 1 3-1 3-2 A production function shows how businesses transform factors of production into output of goods and services through the applications of technology.
More informationECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS
ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS Due the Week of June 23 Chapter 8 WRITE [4] Use the demand schedule that follows to calculate total revenue and marginal revenue at each quantity. Plot
More information2. With an MPS of.4, the MPC will be: A) 1.0 minus.4. B).4 minus 1.0. C) the reciprocal of the MPS. D).4. Answer: A
1. If Carol's disposable income increases from $1,200 to $1,700 and her level of saving increases from minus $100 to a plus $100, her marginal propensity to: A) save is three-fifths. B) consume is one-half.
More informationECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS
ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS Due the Week of July 14 Chapter 11 WRITE: [2] Complete the following labour demand table for a firm that is hiring labour competitively and selling its
More informationIntroductory Microeconomics
Introductory Microeconomics January 7 lecture Economics Definition: The social science concerned with the efficient use of scarce resources to achieve the maximum satisfaction of economic wants. Efficient:
More informationEcon 202 Final Exam. Table 3-1 Labor Hours Needed to Make 1 Pound of: Meat Potatoes Farmer 8 2 Rancher 4 5
Econ 202 Final Exam 1. If inflation expectations rise, the short-run Phillips curve shifts a. right, so that at any inflation rate unemployment is higher. b. left, so that at any inflation rate unemployment
More informationLearning Objectives. After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to:
Learning Objectives After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to: Discuss three characteristics of perfectly competitive
More informationECON20310 LECTURE SYNOPSIS REAL BUSINESS CYCLE
ECON20310 LECTURE SYNOPSIS REAL BUSINESS CYCLE YUAN TIAN This synopsis is designed merely for keep a record of the materials covered in lectures. Please refer to your own lecture notes for all proofs.
More informationIn this chapter we learn the potential causes of fluctuations in national income. We focus on demand shocks other than supply shocks.
Chapter 11: Applying IS-LM Model In this chapter we learn the potential causes of fluctuations in national income. We focus on demand shocks other than supply shocks. We also learn how the IS-LM model
More informationChapter 8. Competitive Firms and Markets
Chapter 8. Competitive Firms and Markets We have learned the production function and cost function, the question now is: how much to produce such that firm can maximize his profit? To solve this question,
More informationchapter >> Making Decisions Section 2: Making How Much Decisions: The Role of Marginal Analysis
chapter 7 >> Making Decisions Section : Making How Much Decisions: The Role of Marginal Analysis As the story of the two wars at the beginning of this chapter demonstrated, there are two types of decisions:
More informationPre-Test Chapter 8 ed17
Pre-Test Chapter 8 ed17 Multiple Choice Questions 1. The APC can be defined as the fraction of a: A. change in income that is not spent. B. change in income that is spent. C. specific level of total income
More informationLab 17: Consumer and Producer Surplus
Lab 17: Consumer and Producer Surplus Who benefits from rent controls? Who loses with price controls? How do taxes and subsidies affect the economy? Some of these questions can be analyzed using the concepts
More informationEconomics 212 Principles of Macroeconomics Study Guide. David L. Kelly
Economics 212 Principles of Macroeconomics Study Guide David L. Kelly Department of Economics University of Miami Box 248126 Coral Gables, FL 33134 dkelly@miami.edu First Version: Spring, 2006 Current
More informationChapter 6 Competitive Markets
Chapter 6 Competitive Markets After reading Chapter 6, COMPETITIVE MARKETS, you should be able to: List and explain the characteristics of Perfect Competition and Monopolistic Competition Explain why a
More informationUse the following to answer question 9: Exhibit: Keynesian Cross
1. Leading economic indicators are: A) the most popular economic statistics. B) data that are used to construct the consumer price index and the unemployment rate. C) variables that tend to fluctuate in
More informationMoney and Banking Prof. Yamin Ahmad ECON 354 Spring 2006
Money and Banking Prof. Yamin Ahmad ECON 354 Spring 2006 Final Exam Name Id # Instructions: There are 30 questions on this exam. Please circle the correct solution on the exam paper and fill in the relevant
More informationThe labour market, I: real wages, productivity and unemployment 7.1 INTRODUCTION
7 The labour market, I: real wages, productivity and unemployment 7.1 INTRODUCTION Since the 1970s one of the major issues in macroeconomics has been the extent to which low output and high unemployment
More informationPractice Questions Week 8 Day 1
Practice Questions Week 8 Day 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The characteristics of a market that influence the behavior of market participants
More informationChapter 12. Unemployment. covered in the final exam) 12-1 History of Unemployment in the New Zealand. discouraged and underemployed workers.
Chapter 12 13-1 Unemployment (Note: Chapter 12 will not be covered in the final exam) 12-1 History of Unemployment in the New Zealand 13-2 Unemployment rate over time. Recap of definition & issue of discouraged
More informationEconomics Chapter 7 Review
Name: Class: Date: ID: A Economics Chapter 7 Review Matching a. perfect competition e. imperfect competition b. efficiency f. price and output c. start-up costs g. technological barrier d. commodity h.
More informationEcon 202 Section 4 Final Exam
Douglas, Fall 2009 December 15, 2009 A: Special Code 00004 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Section 4 Final Exam 1. Oceania buys $40
More informationThe labor market. National and local labor markets. Internal labor markets. Primary and secondary labor markets. Labor force and unemployment
The labor market The labor market differs from most product markets in several important ways. Among these differences are: labor services are rented, not sold, labor productivity is affected by pay and
More informationAdvanced International Economics Prof. Yamin Ahmad ECON 758
Advanced International Economics Prof. Yamin Ahmad ECON 758 Sample Midterm Exam Name Id # Instructions: There are two parts to this midterm. Part A consists of multiple choice questions. Please mark the
More informationLabour markets. Spring 2013. Suppose workers can freely choose the amount of hours they work, wages are given, no unemployment.
Labour markets Spring 2013 1 A Static Model of Labour Supply Suppose workers can freely choose the amount of hours they work, wages are given, no unemployment. Interpretations: Literally choosing hours
More information