1. Unit 5: The Resource Market
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2. Shifter Review 3 Resource Demand Shifters (Based on MRP)
Demand (price) of the product
Productivity of the resource
Price of related resources
3 Resource Supply Shifters
Number of qualified workers
Education, training, & abilities required
Government regulation/licensing
Ex: What if waiters had to obtain a license to serve food?
3. Personal values and traditions regarding leisure time and societal rolls.
Ex: Why did the US Labor supply increase during WWII?
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3. Monopsony
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4. Imperfect Competition: Monopsony
Resource Markets
Perfect
Competition
Monopsony
Imperfect Competition: Monopsony
Characteristics:
One firm hiring workers
The firm is large enough to manipulate the market
Workers are relatively immobile
Firm is wage maker
To hire additional workers the firm must increase the wage
Examples:
Central American Sweat Shops
Midwest small town with a large Car Plant
NCAA
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5. Marginal Resource Cost
Assume that this firm CAN’T wage discriminate and must pay each worker the same wage.
Acme Coal Mining Co.
Wage rate (per hour)
Number of
Workers
Marginal Resource Cost
$4.00
4.50 1
5.00 2
5.50 3
6.00 4
7.00 5
8.00 6
9.00 7
10.00 8
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6. Marginal Resource Cost
Assume that this firm CAN’T wage discriminate and must pay each worker the same wage.
MRC doesn’t
equal wage
Acme Coal Mining Co.
Wage rate (per hour)
Number of
Workers
Marginal Resource Cost
$4.00  -
4.50 1
 $4.50
5.00 2
 5.50
5.50 3
 6.50
6.00 4
 7.50
7.00 5 11
8.00 6
 13
9.00 7
 15
10.00 8
 17
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7. If the firm can’t wage discriminate, where is MRC?
Monopsony
If the firm can’t wage discriminate, where is MRC?
MRC
Wage SL WE
DL=MRP QE
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8. Identify the wage and quantity of labor that would be hired by this monopsony
MRC
$15
Supply
of Labor
$12
$10
Wage=$9
Quantity= Q2 $9
MRP Q1 Q2 Q3
Quantity
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9. Monopoly vs. Monopsony Wage MRC SL WE DL=MRP QL Price MC PE D MR Q QE
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10. Goal is to increasing wages and benefits
Labor Unions
Goal is to increasing wages and benefits
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11. How do Unions Increase Wages?
Convince Consumers to buy only Union Products
Ex: Advertising the quality of union/domestic products
Lobbying government officials to increase demand
Ex: Teacher’s Union petitions governor to increase spending.
Increase the price of substitute resources
Ex: Unions support increases in minimum wage so employers are less likely to seek non-union workers
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