monopoly + the macro labor market Flashcards
what can DWL be caused by?
monopoly, oligopoly, taxes, artificial scarcity, externalities, subsidies, price controls
monopoly
a firm that’s the only seller of a product without close substitutes
oligopoly
a market with a small number of sellers producing the same good
market power
an attribute of a firm that can sell its product at a range of feasible prices by acting as a price setter
when is monopoly markup the highest?
when demand is inelastic, life sustaining
when can monopoly markup be a good thing?
it motivates people cause if they invent something they expect very high profits.
participation rate
labour force / population of working age
unemployment rate
unemployed / labour force
employment rate
employed / population of working age
why does unemployment exist?
the cost of losing a job iz zero if there’s no unemployment
structural unemployment
its long term and persistent- a mismatch between skills demanded and skills possessed
what may cause structural unemployment?
technology- travel agents
China enters WTO
labour regulations can affect… (2)
- incentives to hire someone
2. incentives to look for work
cyclical unemployment
there was a possible match but there’s not enough demand- you’re unlucky that someone got there first.
aggregate demand
sum of the demand for all goods/services
demand deficient unemployment
under normal terms, this person would have had a job
political business cycle
politicians stimulate economy before elections
frictional unemployment
you found matches but it took a long time- unemployment due to friction in matching employers and employees
natural rate of unemployment
frictional + structural (it exists naturally, not due to fluctuations)
why can’t we increase minimum wage?
the value they’re getting for that labour is under the price they’re forced to pay by the govt. (price increase, value same) => company hires less people.
what do labour unions do?
they raise wages by reducing supply.
