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Economics - Macro > Labour market > Flashcards

Labour market Flashcards

1
Q

What model do we use for labour?

A

Neoclassical

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2
Q

What does it mean that we start with a micro founded model for the labour market?

A

We assume a micro model and then scale it up to macro by multiplying it by how many firms there are

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3
Q

What model do we use for the labour market?

A

Neoclassical

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4
Q

What are two standard neoclassical propeties?

A

Positive diminishing returns to the factors and constant returns to scale

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5
Q

What production function do we use for the labour market and what do we simplify it to and why?

A

y = f(Ǩ,N,Â) ≈ f(N) capital stock and technology are considered fixed in the short term

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6
Q

What is the main aim of any firm?

A

To maximise profits

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7
Q

What profit function to firms face?

A

∏ = Pf (N) − WN

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8
Q

What does the two parts of this equations and for? ∏ = Pf (N) − WN

A

Pf (N) - total revenue

WN - labour bill

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9
Q

What do W and N stand for?

A

Nominal wage and number of men hours employed

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10
Q

How do you find the marginal product of labour?

A

Differentiate the profit function with respect to N

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11
Q

What is the equation for marginal product of labour? And the marginal product of labour multiplied by price?

A 
W/P = f'(N) = MPN
W = P.f'(N) = P.MPN
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12
Q

What is the condition for demand in the labour market?

A

Equality between the real wage and the marginal product of labour, or equality between the nominal wage and the value of the marginal product of labour.

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13
Q

What shape is the demand for labour curve?

A

Downwards sloping curve

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14
Q

What neoclassical property means the labour demand curve slopes downwards?

A

Positive diminishing returns

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15
Q

Who represents the supply side of the labour market?

A

Households

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16
Q

What is the households main aim?

A

To maximise his utility, through the consumption go goods and leisure

17
Q

What is the utility function for households?

A

U = U(c,l)

18
Q

Why do we use expected price int eh labour supply equation?

A

Time lag between earning wages and expenditure of such income

19
Q

Why do we use expected price int eh labour supply equation?

A

Time lag between earning wages and expenditure of such income

20
Q

What is the equation for the labour supply curve?

A

c =W/Pe (12−l)

21
Q

What two equations do we combine to form the labour supply curve?

A

12 = l + N, Pec =WN

22
Q

What is the effect of raising wages on the labour supply curve?

A

It would steep the budget constrain and rise there vertical intercept

23
Q

Why does raising wages increase the vertical intercept but not the horizontal intercept of the labour supply curve?

A

Increasing the wages increases the maximum labour income but it doesn’t change he number of working hours in a day

24
Q

What is the expected labour supply function?

A

W =Pe g(N)

we = W/Pe = g(N)

25
Q

Where is the equilibrium in the labour market?

A

The intersection between the labour supply and demand curves

26
Q

What are the two different graphs you can draw for labour supply?

A

Either nominal wage, W or real wage W/P

27
Q

What is meant by all unemployment is voluntary in the model?

A

The man hours not employed because the households choose to enjoy them hours as leisure

28
Q

What is perfect competition in the labour supply model?

A

Atomistic bargaining, where workers individually bargain for their wages and have no power to affect the wage they are paid for their efforts

29
Q

What is imperfect competition in the labour supply model?

A

When workers bargain for their wages and can effect the price they get paid

30
Q

How does imperfect competition effect the labour supply curve?

A

Parallel shift upwards

31
Q

Are wages higher with perfect or imperfect competition?

A

Imperfect

32
Q

Where is the equilibrium point for labour demand for an imperfect competitive firm?

A

Equality of the real wage and the marginal product of labour multiplied by a factor of 1 + the elasticity of demand

33
Q

Where is the equilibrium point for labour demand for an imperfect competitive firm?

A

Equality of the real wage and the marginal product of labour multiplied by a factor of 1 + the elasticity of demand

34
Q

Draw the voluntary and involuntary employment on a labour demand and supply graph.

A

Picture

Economics - Macro (8 decks)

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