Week 4 Flashcards
How is the rationality model applied to labour demand by firms?
Firms are assumed to demand labor based on the marginal productivity of the workers they hire. This means that firms will only hire workers if the additional output they produce is worth more than the cost of hiring them.
How is the rationality model applied to labour supply by consumers?
Consumers are assumed to supply labor based on their marginal rate of substitution, which is the amount of additional consumption they are willing to give up in order to work additional hours. This means that consumers will only supply labor if the additional income they earn is worth more than the consumption they have to give up.
What is the effect of robotics and AI on labour demand?
The use of robotics and AI can lead to a decrease in the demand for labor, as machines can often perform tasks more efficiently and at a lower cost than human workers. This can result in job losses and reduced wages for workers in affected industries.
What is the effect of robotics and AI on labour supply?
The use of robotics and AI can lead to an increase in the supply of labor, as machines can help workers to be more productive and efficient. This can result in workers being able to produce more output in the same amount of time, which can increase their income and lead to an increase in the supply of labor.
How does the rationality model explain the effects of robotics and AI on the labor market?
According to the rationality model, firms will only use robotics and AI if it is profitable to do so. This means that if the cost savings from using machines outweigh the cost of investing in them, firms will choose to use robots and AI. This will lead to a decrease in the demand for labor, as machines can perform tasks more efficiently than human workers.
What are the implications of the rationality model for workers in the labor market?
The rationality model suggests that workers will be affected by the use of robotics and AI in the labor market. If firms choose to use machines instead of hiring workers, this can result in job losses and reduced wages for workers in affected industries.
How does the rationality model explain the effects of robotics and AI on the economy as a whole?
According to the rationality model, the use of robotics and AI can lead to increased productivity and efficiency in the economy. This can lead to an overall increase in economic growth and wealth. However, it can also lead to job losses and income inequality, as some workers may be unable to adapt to the change.
