Term
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Definition
An imperfection in the market mechanism that prevents optimal outcomes
MC is typically below ATC |
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Term
| Two ways of Government Intervention |
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Definition
1. structure of a market:mergers, acquisitions, and competitive nature of the market
2. Behavior of firms in a market: pricing, output decisions, advertising |
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Term
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Definition
| firm where ATC declines over the entire output range |
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Term
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Definition
ATC is always decreasing as output increases
MC is typically below ATC |
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Term
| regulated natural monopolies |
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Definition
govt allows certain markets to be dominated by one supplier
IF one firm operated by the principle of profit maximizing, it would reduct output and charge higher prices |
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Term
| Equilibrium Price in the Labor Market |
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Definition
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Term
| Equilibrium quantity in Labor Market |
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Definition
| number of people employed |
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Term
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Definition
| the willingness and ability to work specific amounts of time at a variety of wages in a given time period, certain parabis |
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Term
| Opportunity cost of working |
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Definition
| the amount of leisure that must be given up |
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Term
| Higher wages are required to compensate for... |
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Definition
the higher opportunity costs of labor
ex. Oc of working 10 hrs a week is high but OC of working 70 hrs a week is higher |
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Term
| Diminishing Marginal Returns |
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Definition
| marginal utility of income decreases as your income increases |
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Term
| Two effects of change in income |
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Definition
1. Substitution effect
2. Income Effect |
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Term
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Definition
increased wage rate encourages people to work more hours
ex. offer to be paid time and a half on holidays |
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Term
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Definition
| an increase wage rate allows a person to reduce hours worked without losing income |
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Term
| which type of effect is stronger? |
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Definition
-income effect is stronger than the substitution effect, then there is possibility that a worker will actually be less willing to work at higher wages
-this means that there is a backward bend in the S Curve |
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Term
| Total market supply of Labor |
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Definition
| total quantity of labor that workers are willing and able to supply at a variety of wages in a given time period |
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Term
| Determinants of Labor Supply |
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Definition
1. Tastes (for leisure, work, and income)
2. Income and Wealth
3. Expectations
4. Prices of Consumer goods
5. Taxes |
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Term
| if determinants of labor supply change then.. |
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Definition
| the supply curve will shift in/out |
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Term
| if wage rage changes (price) then |
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Definition
| we will simply move to a different point along the supply curve |
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Term
| Elasticity of Labor Supply |
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Definition
| The percentage change in the quantity of labor supply given a percentage change in wage rate |
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Term
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Definition
| the quantities of labor employees are willing and able to hire at alternative wages in a given time period, ceteris perabis |
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Term
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Definition
| the demand for labor and other factors of production depends on the demand for the final goods and services produced by these factors |
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Term
| when demand for a product increases.. |
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Definition
then that industry likely demands more labor
-when demand decreases people get fired |
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Term
| Marginal Physical Product |
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Definition
| change in total output divided by change in quantity of labor |
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Term
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Definition
| change in total revenue/change in Q of Labor |
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Term
| minimum wage encourages... |
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Definition
-more law skilled workers to seek employment
-quantity of labor supply |
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Term
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Definition
the amount of output associated with an additional dollar spent on input
mpp/price |
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Term
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Definition
| choice of production process |
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Term
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Definition
| received by households before payment of taxes ex. monthly paycheck |
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Term
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Definition
| goods/services received directly without payment in a market transaction |
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