Labor and Financial Markets Flashcards
How Do Salary and Labor Relate to Supply and Demand?
Just like the supply and demand of a good. More people (S) are willing to work at a higher wage, but less workers are employed (D)
Salary/Wage = Price Labor = Quantity
Employees = Supply Employers = Demand
When Demand Increases What Happens to the Labor Market?
When demand for a good increases, price and profitability increases, causing and increase in labor demand to keep up with production
How Does Increased Training/Education Affect the Labor Market?
Well-trained and educated employees causes an increase in demand for that labor.
How Does Technology Affect the Labor Market?
Substitute - when technology is a substitute to the workforce demand for labor decreases
Compliment - when technology compliments the workforce demand for labor increases
Effects of an Increase in Minimum Wage
Higher wage will reduce the amount of employment (demand for labor decreases) creating a surplus in supply (supply/labor increases at the wage)
Who Demands and Who Supplies in Financial Markets?
Supply - those who loan the money and earn an interest rate
Demand - those who receive the money
What Goes on the Y-Axis of a Financial Market Graph
Interest Rate
What Goes on the X-Axis of a Financial Market Graph?
Quantity of Money
In the financial market, what causes a movement along the supply curve? What causes a shift in supply?
Changes in interest rates cause a movement along the supply curve.
A change in non-interest rate variable affecting supply of financial capital would shift the curve
Usury Law
Impose a price ceiling on interest rates
How is equilibrium defined in financial markets?
Quantity of funds demanded (D) meets the quantity of funds supplied (S)
What creates a shortage in the financial market?
If interest rate is below the equilibrium market then D > S
Would usury laws help or hinder resolution of a shortage in financial markets?
Usury laws create a price ceiling on interest rates. If this rate is below market equilibrium it would hinder the resolution of a shortage. If the price is set above market equilibrium the market is free to fluctuate as needed and would help resolve a shortage.
In the labor market, what causes a movement along the demand curve?
What causes a shift in the demand curve?
Changes in wage rate (price of labor) causes a movement along the demand curve
- as wages rise more supply will enter the market shifting the supply curve and a movement along the demand curve.
Changes
In the labor market, what causes a movement along the demand curve?
What causes a shift in the demand curve?
Movement - change in wage rate. Raises will decrease the quantity demanded and a movement upward on the curve (supply shift). Decrease in wages will increase the demand and a movement down along the demand curve (supply shift).
Shifts - caused by an increased demand of a good/service.
If demand for a good increases then employers will want to hire more labor. If demand decreases then employers will slow down production.
