Labour markets Flashcards
what is the profit maximisation rule for hiring?
when MRPL = MRC
How do you add a minimum wage?
you add a wage floor
number of workers fired as a result of minimum wage
fall in demand from 100 to 50
50 workers fired
number of workers who entered the industry, as a result of minimum wage
supply rose from 100 to 120
20 more workers entered
number of unemployment as a result of minimum wage
surplus represents unemployment in the labour market
this case, 70 workers
in a perfectly competitive labour market, each worker supplies their labour at the
wage set by the market (price takers due to perfect competition)
in a perfectly competitive labour market
supply for labour=
marginal resource cost (MRC)
because the additional cost for each worker is constant
in a perfectly competitive labour market
demand for labour
demand for labour is downward sloping as each additional worker generates less marginal revenue
demand = marginal revenue product (D=MRP)
in a perfectly competitive labour market, hire workers when
MRC (marginal resource cost) = MRP (marginal resource product)
Hire workers as long as MRP>MRC
what is marginal resource cost?
additional cost for each additional INPUT (worker)
what is marginal revenue and cost?
additional cost for each additional output
additional revenue for each additional output
in a perfectly competitive labour market, how many workers be hired by this firm?
given cost of each worker is 20
price of product is 10
0 workers = 0 output
1 worker = 5
2 workers = 12
3 workers = 16
4 workers = 17
5 workers = 15
hire qty workers that achieves MRP>MRC
here, 3 workers
what does the supply and demand in resource market look like?
if demand falls for the product being produced, what will change?
MRP (D) will decrease
as price for product falls
