Chapter10 Flashcards
Law of Diminishing Returns
As more labor is used, the extra output that an employee can produce declines at some point
Value Marginal Product (VMP)
Marginal product of worker multiplied by price of output
VMP is…
demand for labor.
Human Capital
Education and training may raise individuals productivity
Screening Theory
Education and training may be valuable to the individual, not because it increases productivity, but because it points out which employees will be good
under human capital,
subject matter is important
under screening theory,
subject matter is of no interest
Make Work Fallacy
Idea that jobs have value, regardless of whether labor creates value
Minimum Wage
State requires a minimum wage
Establishment Survey
Asks large businesses about how many employees are on their payroll, to measure the number of jobs economy is creating
Household Survey
Asks individuals about their employment status by phone
Unemployment Rate
unemployed/civilian labor force
Any unemployment rate over 5.5% is..
high
Labor Force Participation Rate (LFPR)
LF/CNIP ; measures how many ppl are interested in holding jobs
Discouraged Workers
Those who have looked for a job at some time during previous 12 months, but are no longer because they believe no jobs are available
New Claims for Unemployment Insurance
Compiled by states and collected by Department of Labor weekly
Friction Unemployment
Normal workings of labor force with people changing jobs and entering labor force with skills that will soon yield a job
Structural Unemployment
Longer term problem which occurs due to changes in labor force that render some skill obsolete
Cyclical Unemployment
What we usually think of as unemployment
Cyclical Unemployment arises due to
contractions that occur during the business cycle.
Full Employment
When there is no cyclical unemployment
Frictional unemployment is
natural and not problematic.
If economy is moving,
it is healthy.