Lecture 1

Question 1

Why labor economics?

Answer 1

1. The commodity in the market can not be separated from the seller (worker/ee) e.g., (skill sets can not be separated from the worker)
2. We don’t allow labor to be sold and bought indefinitely (we banned salary)
3. Labor enters into all trade and markets

Question 2

What are the 3 types of statement?

Answer 2

1. Descriptive statement
2. Predictive statement
3. Normative or prescriptive statement

Question 3

What is a descriptive statement?

Answer 3

Describes what the world looks like

Ex. The unemployment rate is 4.9% (July 2016)

Question 4

What is a predictive statement?

Answer 4

Predicts the effect or change of an action - hypothesis to see if it’s true or false, not necessarily opinionated

Ex. An increase in the minimum wage will increase the unemployment rate

Question 5

What is normative or prescriptive statement?

Answer 5

Describes what should be done - provides a value judgment

• Data does not help with value judgment

Ex. We should not increase the minimum wage

Question 6

What are positive statements?

Answer 6

Descriptive & Predictive are positive statements because they are empirically testable with data

Question 7

What type of statements do economists use? Why?

Answer 7

Economics are at its best with descriptive and predictive statements because economist usually don’t tell you what you should do

Question 8

Pareto Efficiency

Answer 8

An allocation of resources is pareto efficient when it is not possible to make one person better off without making someone worse off

Question 9

What are some examples of pareto efficiency?

Answer 9

1. Equal distribution: someone may have inputted more resources than someone else (unfair)
2. One person receives all the money