Term
| Why are labor markets important? |
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Definition
In a market economy, we rely on them to...
-direct labor services to their highest/best uses
-to determine the distribution of income among laborers
-for knowledge on how labor markets can provide |
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Term
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Definition
| the quantities of labor demanded at different wage rates |
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Term
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Definition
| the demand for a factor of production (i.e. labor), which is derived from the demand for the goods/services that it used to produce |
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Term
| Determinants of Labor Demand |
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Definition
-the price of labor (wage rates), relative to the prices of other resources
-the productivity of decreasing returns, the marginal product (MP) of labor decreases as employment of labor increases
-the price of the good/service produced by labor |
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Term
| Marginal Revenue Product of Labor (MRPL) |
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Definition
The change in the firm's total revenues (TR) resulting from the employment of an additional unit of labor
MRPL = (Change in TR)/(Change in L) |
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Term
| When product price is constant (output is sold in competitive markets)... |
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Definition
MRPL=Value of Marginal Product of Labor (VMPL) where...
VMPL = (MP*Product Price)
-when the product price is constant, MRPL (or VMPL) declines as the employment of labor increases because the MP of labor decreases as labor employment increases |
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Term
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Definition
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Term
| Relationship between MRPL and Labor Demand: Individual Firm |
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Definition
MRPL represents the amount of money each additional unit of labor makes for the firm, so MRPL represents the maximum amount the firm can pay for each additional unit of labor
-since MRPL represents the maximum amount the firm (and will) pay for each additional unit of labor, the MRPL curve represents the firm's demand curve for labor |
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Term
| Relationship between MRPL and Labor Demand: Labor Market |
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Definition
| -market demand is obtained by horizontal summation (sum of quantities demanded at each price) of the MRPL curves of all the firms in the market, so the factor market demand curve slopes downward because of the law of decreasing returns |
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Term
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Definition
| is Wage Rate (price of labor) in the labor market |
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Term
| Movement along the labor market demand curve |
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Definition
caused by changes in the wage rate
-an increase in the wage rate results in a decrease in the quantity of labor demanded
-a decrease in the wage rate results in an increase in the quantity of labor demanded |
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Term
| Shifts of the Labor Market Demand Curve |
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Definition
caused by changes in non-wage determinants of labor demand
-changes in labor productivity
-changes in product price (caused by changes in product demand) |
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Term
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Definition
| the knowledge and skill that people obtain from education, on-the-job training, and work experience |
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Term
| What shifts the labor market demand curve? |
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Definition
-changes in product price (caused by changes in product demand--directly related to labor demand
-an increase in product price shifts the labor demand curve rightward, and vice versa |
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Term
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Definition
-the quantities of labor workers in an industry are willing and able to supply at different wage rates
-the labor market supply curve is typically drawn with a positive slope (like most supply curves) |
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Term
| why the labor supply curve has a positive slope |
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Definition
-a higher wage rate encourages existing workers in a market to work more hours (up to a point)
-a higher wage rate in a market encourages workers in related markets to work in markets where the wage rate is higher (arbitrage revisited) |
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Term
| determinants of labor supply |
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Definition
-wage rate
-working conditions
-participation rate
-population and immigration |
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Term
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Definition
changes in the wage rate results in movements along the labor market supply curve
-an increase in the wage rate results in an increase in the quantity of labor supplied (and vice versa) |
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Term
| Labor Supply: Working Conditions |
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Definition
(non-wage determinant) directly related to supply
-improvements in working conditions shift the labor supply curve rightward (and vice versa) |
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Term
| Labor Supply: Participation Rate |
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Definition
(non-wage determinant) the percent of the population found in the civilian labor force (directly related to supply)
-an increase in participation rate shifts the labor supply curve rightward (and vice versa) |
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Term
| Labor Supply: Population/Immigration |
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Definition
(non-wage determinant)directly related to supply
-an increase in population and immigration shifts the labor supply curve rightward (and vice versa) |
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Term
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Definition
any institution that brings buyers and sellers of labor services together
-the equilibrium wage rate and employment (quantity of labor) level are determined at the point of intersection of the labor demand and supply curves |
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Term
| Forces that shift the Labor Supply Curve: |
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Definition
(non-wage determinants)
-changes in working conditions
-changes in participation rates
-changes in population/immigration |
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