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Lecture 22 Noncompetitive Factor Markets. 3 questions u Market power on goods market and demand for labor u Buyers Market Power: Labor Market.

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Presentation on theme: "Lecture 22 Noncompetitive Factor Markets. 3 questions u Market power on goods market and demand for labor u Buyers Market Power: Labor Market."— Presentation transcript:

1 Lecture 22 Noncompetitive Factor Markets

2 3 questions u Market power on goods market and demand for labor u Buyers Market Power: Labor Market

3 Competitive Demand

4 Equilibrium: Competitive Model

5 Monopoly Demand

6 Equilibrium in LM w/p y

7 Monopoly and LM u Increasing Labor by 1 gives less than MPL of revenue u Monopoly demands less labor u The reduction of employment depends on elasticity

8 Monopsony u Market power on “buyers” side u Most important monopsony: Labor market u Monopsony and minimal wage rate

9 Monopsony

10 Monopsony: Secret of Happiness

11 Monopsony: Optimal Choice

12 Minimal Wage Rate

13 Minimal Wage rate: Monopsony u Increases Labor in equilibrium u Increases wage in equilibrium u Restores efficiency

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