Productivity And Labour Market Flashcards
1
Q
What is the formula for the Production Function?
A
Formula: , where : productivity, : capital, : labor.
2
Q
What is the Marginal Product of Labor (MPN)?
A
Definition: Increase in output from hiring one additional worker.
Formula: .
3
Q
What are the properties of MPN?
A
MPN diminishes as increases.
4
Q
What is a Productivity Shock?
A
Positive shock: Increases output and shifts MPN up.
Negative shock: Decreases output and shifts MPN down.
5
Q
What is the Labor Supply Curve?
A
Definition: Shows hours worked at different wage levels.
6
Q
What is the Substitution Effect?
A
Higher wages → labor supply increases (leisure is costly).
7
Q
What is the Income Effect?
A
Higher wages → labor supply decreases (worker feels richer).
8
Q
What is Labor Market Equilibrium?
A
Where labor demand = labor supply.
