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comm 220: market analysis > chapter 4 from book: overview of the labor market > Flashcards

chapter 4 from book: overview of the labor market Flashcards

1
Q

the labor market

A

market that allocates workers to jobs and coordinates employment decisions

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2
Q

national labor market

A

buyers of labor and sellers of labor are searching throughout the entire nation for each other

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3
Q

local labor market

A

buyers of labor and sellers of labor are searching tlocally for each other

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4
Q

when is an internal labor market said to exist?

A

When a formal set of rules and procedures guides and constrains the employment relationship within a firm

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5
Q

the labor force

A

all those over 16 years of age who are employed

all those over 16 years of age actively seeking work,

all those over 16 years of age expecting recall from a layoff

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6
Q

Those in the labor force who are not employed for pay

A

the unemployed

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7
Q

are people who are not employed and are neither looking for work nor waiting to be recalled from layoff by their employers counted as part of the labor force?

A

nah boy

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8
Q

the total labor force

A

the employed and the unemployed

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9
Q

what are the 4 major flows of the labor market?

A
  1. Employed workers become unemployed by quitting voluntarily or being laid off (being involuntarily separated from the firm, either temporarily or permanently).
  2. Unemployed workers obtain employment by being newly hired or being recalled to a job from which they were temporarily laid off.
  3. Those in the labor force, whether employed or unemployed, can leave the labor force by retiring or otherwise deciding against taking or seeking work for pay (dropping out).
  4. Those who have never worked or looked for a job expand the labor force by entering it, while those who have dropped out do so by reentering the labor force.
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10
Q

labor force participation rate

A

labor force divided by population

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11
Q

unemployment rate

A

The ratio of those unemployed to those in the labor force

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12
Q

when is the labor market considered tight?

A

When the unemployment rate is around 5 percent

when jobs in general are plentiful and hard for employers to fill

most of those who are unemployed will find other work quickly

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13
Q

when is the labor market considered loose?

A

When the unemployment rate is 5 percent or higher

workers are abundant and jobs are relatively easy for employers to fill

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14
Q

which industries have experience a drop in labor?

A

goods-producing industries (largely manufacturing)

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15
Q

which industries have experience a boom in labor?

A

private-sector services

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16
Q

The wage rate

A

the price of labor per working hour

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17
Q

The nominal wage

A

what workers get paid per hour in current dollars

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18
Q

what do you want to compare with nominal wages?

A

the pay of various workers at a given time

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19
Q

Real wages

A

suggest how much can be purchased with workers’ nominal wages

nominal wages divided by some measure of prices

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20
Q

when are real wages useful

A

useful in comparing the purchasing power of workers’ earnings over a period of time when both nominal wages and product prices are changing

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21
Q

The most widely used measure for comparing the prices consumers face over several years

A

the Consumer Price Index (CPI)

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22
Q

why are the bundles used for pricing purposes in the CPI updated periodically?

A

because consumers change what they buy over the years

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23
Q

the payment for a unit of time

A

wages

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24
Q

wages multiplied by the number of time units (typically hours) worked

A

earnings

depend on both wages and the length of time the employee works

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25
Q

total compensation

A

earnings plus employee benefits

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26
Q

employee benefits

A

either payments in kind or deferred

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27
Q

what type of benefits are the following

employer-provided health care and health insurance

Paid vacation time

A

payments in kind

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28
Q

Deferred payments

A

can take the form of employer-financed retirement benefits

employers set aside money now that enables their employees to receive pensions later

29
Q

income

A

the total command over resources of a person or family during some time period

includes earnings, benefits, and unearned income

30
Q

unearned income

A

dividends or interest received on investments

transfer payments received from the government in the form of food stamps

welfare payments

unemployment compensation

etc

31
Q

what are the three markets firms have to opperate in order to survive?

A

labor market

capital market

product market

32
Q

terms of employment

A

wages

compensation levels

working conditions

33
Q

what are major labor outcomes related to?

A

(a) the terms of employment
(b) the levels of employment

these in turn determine demand and supply

34
Q

on which forces do a firm’s total output and the way it combines labor and capital depend on?

A

product demand

the amount of labor and capital they can acquire at given prices

the choice of technologies available to them

35
Q

What would happen to the quantity of labor demanded if the wage rate were increased?

A

first, higher wages imply higher costs and, usually, higher product prices

consumers buy less, sellers reduce their output

in turn, they reduce their employment

Second, as wages increase (assuming the price of capital does not change, at least initially), employers have incentives to cut costs by adopting a technology that relies more on capital and less on labor

36
Q

the scale effect created by higher wages

A

reducing employment due to higher wages

37
Q

substitution effect created by higher wages

A

employment would fall because of a shift toward a more capital-intensive mode of production

wages increased so capital is substituted for labor in the production process

38
Q

what happens to the demand curve for labor if the demand for a firm’s product increases?

A

demand curve shifts to the right

39
Q

what happens to the demand for labor if the demand for a firm’s product increases? why?

assuming that wages and capital costs remain constant

A

demand for labor at every wage level is increased

firms wanna to increase their output, so they need more labor

40
Q

scale effect created by higher demand of a product if capital and wage remain unchanged

A

increase the demand for labor at any given wage rate

Output levels would clearly rise as firms in the industry sought to maximize profits

41
Q

substitution effect created by higher demand of a product if capital and wage remain unchanged

A

does not exist

42
Q

how would the demand for labor be affected if capital prices fell to 50 percent of their prior level (change the supply of capital)

A

we must consider the scale and substitution effects

when capital prices decline, the costs of producing tend to decline

increases in production, and these increases tend to raise the level of desired employment at any given wage

The scale effect of a fall in capital prices thus tends to increase the demand for labor at each wage level

then it is the substitution effect where firms adopt more capital-intensive technologies in response to cheaper capital

firms would substitute capital for labor and would use less labor to produce a greater amount of output than before

43
Q

scale effect created by a drop of capital prices considering wages remain unchanged

A

want to produce more because of reduced costs

hire more people

44
Q

substitution effect created by a drop of capital prices considering wages remain unchanged

A

after the scale effect, firms will want to use more capital-intensive technologies in response to cheaper capital

firms would substitute capital for labor and would use less labor to produce a greater amount of output than before

45
Q

what happens to demand curve for labor when there is a drop of capital prices considering wages remain unchanged?

A

the scale effect makes the curve shift to the right

we want more labor to produce more goods due to reduced production costs

then, the substitution effect makes the curve shift to the left

we focus more on capital intensive technologies and they replace labor

46
Q

what happens to demand curve for labor when there is a rise of capital prices considering wages remain unchanged?

A

the scale effect makes the curve shift to the left

we want to cut costs at first and the fastest way to do that is by reducing labor

then, the substitution effect makes the curve shift to the right

we focus less on capital intensive technologies and refocus on labor

47
Q

what are the three levels the demand for labor can be analyzed?

A

by a particular firm (firm demand curve)

in an entire industry (industry demand curve)

entire labor market of a certain profession (market demand curve)

all of these demand curves vary in shapes because of the different strengths of the scale of substitution effects, but they all slope downwards

48
Q

how does the market supply curve of a profession react wages change in that same profession?

A

movement along the curve

higher wages means more people want that job (more Qs)

lower wages means less people want that job (less Qs)

49
Q

how does the market supply curve of a profession react when wages change in another profession?

A

the supply curve shifts to the left when wages of another profession rise

the supply curve shifts to the right when wages of another profession decrease

50
Q

why is the supply curve for a firm horizontal?

A

it is the going wage

the firm could get all the workers it needs at that going wage

paying lower wages will make the firm lose all applicants or get those of lesser quality

paying more will only increase costs

furthermore, the choice to which firm to work for is purely based on compensation

51
Q

are individual firms wage takers or wage setters?

A

wage takers

52
Q

market clearing wage

A

The wage rate at which demand equals supply

the going wage that individual employers and employees must face

53
Q

what happens to the labor market equilibrium if the supply stayed the same, the demand curve shifted to the right?

A

going wage would rise

employment would rise

54
Q

what happens to the labor market equilibrium if the supply stayed the same, the demand curve shifted to the left?

A

going wage would fall

employment would fall

55
Q

what happens to the labor market equilibrium if the supply curve shifted to the left and the demand curve stayed the same?

A

going wage would rise

employment would fall

56
Q

what happens to the labor market equilibrium if the supply curve shifted to the left and the demand curve stayed the same?

A

going wage would fall

employment would rise

57
Q

what happens to the labor market equilibrium if the supply curve shifted to the left and the demand curve shifted to the right?

A

dramatic increase in wages

not enough info for the employment level

58
Q

what happens to the labor market equilibrium if the supply curve shifted to the right and the demand curve shifted to the left?

A

dramatic decrease in wages

not enough info for the employment level

59
Q

non-market barriers to market adjustment

A

laws, customs, or institutions constraining the choices of individuals and firms

60
Q

market barriers to reaching adjustments at a particular labor market?

A

workers needing to learn the skill or new skills

costs coming with recruiting and training

61
Q

do non-market forces usually leave the wage above or below equilibirum?

A

usually above

below happens, but rarely

62
Q

main examples of non market keeping wages above equilibrium?

A

minimum wage laws

unions

63
Q

what can create widespread unemployment?

A

f enough markets are experiencing above-market wages

64
Q

overpaid workers

A

their wages are higher than the market-clearing wage for their job

65
Q

benefits of getting rid of overpaid workers

A

could cut wages and still find enough qualified workers for their job openings

expand output and make their product cheaper and more accessible to consumers

more disappointed workers could find work

66
Q

underpaid workers

A

wage is below market-clearing levels

67
Q

benefits of paying more underpaid workers

A

output would rise and more workers would be attracted to the market

an increase would benefit the people in society in both their consumer and their worker roles

68
Q

reservation wage

A

the wage below which the worker would refuse (or quit) the job in question

69
Q

The amount by which one’s wage exceeds one’s reservation wage in a particular job

A

amount of economic rent

comm 220: market analysis (37 decks)

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