supply of labour Flashcards
What is the shape of the individual labor supply curve?
Backward bending
The individual labor supply curve initially increases with wages but eventually decreases as higher wages lead to reduced labor supply.
What is the shape of the industry labor supply curve?
Upward sloping
The industry labor supply curve reflects the aggregate supply from all individual workers in a profession.
Why does the industry labor supply curve slope upward despite individual backward bending supply curves?
Higher wages attract more workers
Workers trained in other professions may return to nursing, and economically inactive nurses may re-enter the workforce due to higher wages.
What happens to the quantity of workers as wages increase?
Increase in quantity of workers
Higher wages incentivize more individuals to supply their labor.
What occurs when wages decrease in the labor market?
Contraction in labor supply
Fewer workers are willing to supply their labor at lower wage rates.
What are non-wage shifters of the labor supply curve?
Factors that affect labor supply irrespective of wages
Examples can include changes in worker preferences, economic conditions, and demographic shifts.
What type of firms are considered wage takers?
Firms in a perfectly competitive labor market
These firms cannot influence the market wage and must accept it as given.
What is the relationship between average cost, marginal cost, and supply of labor for perfectly competitive firms?
Average cost = Marginal cost = Supply of labor
This equality holds because firms in perfect competition cannot set their own wages.
What is the shape of the labor supply curve for a monopsony?
Upward sloping
A monopsony is a single buyer in the labor market, thus it has control over wages.
How does a monopsonist’s marginal cost curve behave compared to its supply curve?
Marginal cost curve is steeper than the supply curve
This is because increasing wages for additional workers also raises wages for all workers already employed.
True or False: Monopsonies are wage takers.
False
Monopsonies are wage makers, as they have control over the wages they set.
What is the implication of a monopsony having control over wages?
They can set different wages for different workers
This control leads to a unique upward sloping supply curve.
What does the average cost of labor equal in a monopsony?
Average cost equals supply curve
Similar to monopolies in product markets, the average cost aligns with the supply curve in labor markets.
