Ch 10 Flashcards
What do people do when they work in labor markets?
They make themselves better off
What is the law of diminishing returns?
as more labor is used the extra output that an individual can produce declines
What happens to the value when more people are hired?
It declines
What is the value of extra output to the employer?
it is the extra revenue that comes in from selling that extra output
What is the Value Marginal Product? (VMP)
the marginal product of a worker multiplied by the price of the output
When will the employer hire more employees?
When the value of the employee is at least as great as the cost of having the employee in terms of revenue
The VMP is what to labor?
the demand for labor
Which way does the VMP slope?
downward
Which way does the labor supply curve?
upward
How does social welfare programs effect the supply of labor?
the supply of labor decreases because less people are willing to work if they benefit for doing nothing
What happens when less people are working?
output decreases therefore our economy/country is not better off and the people whoa are working these higher paying jobs are beneficiaries for the people on welfare
When taxes or higher regulations are placed on employees what happens to the demand for labor?
the demand falls
What happens when the demand falls due to high regulations or taxes placed on employees?
employment lowers and wages lower as well
Why does the law of unintended consequences apply to higher regulations on employees?
Because most of the time when legislation tries to improve working conditions by increasing regulations they make businesses decrease their employment and decrease the employers pay
What is human capital?
the investment in ones self to further their education or themselves in any way; this raises the demand for their labor
What is the screening theory?
it says that education and training may be valuable too the individual, not because the training increases productivity, but because it points out which employees will be good.
What is not of interest in the screening theory?
the subject matter, for screening theory, it is the physical and mental effort that is valuable
What is make work fallacy?
it is the idea that jobs have value
What is the establishment survey?
The bureau of labor statistics ask large businesses about how many employees are on their payroll, to measure the # of jobs the economy is creating
What does the establishment survey not include?
self employed persons or contractors (they are only operating expenses, they are not on the pay roll)
What does the BLS household survey ask?
it asks individuals about their employment status over the phone; which complies the unemployment rate and other statistics
What is included in the Civilian Non-Institutional Population?
members in the population 16 years and older not in the military or institutionalized (about 248.5 million)
What is included in the employed?
everyone who worked at least 1 hour of pay or profit in the previous week. Everyone who was not paid for working in a family business, but worked at least 15 hours at that business in the previous week. Or anyone who didn’t work in the previous week due to illness, vacation etc. (about 146.6 million)
What is included in the unemployed?
everyone not employed, but made efforts to find a job in the previous 4 weeks (about 9.3 million)
