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Labor Supply and Demand
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Equilibrium w The intersection of supply and demand determines wage rates and hours worked. SSR SLR D H
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Shift in Demand w Initially, we move along the SR labor supply curve. Wages go up and people work harder. w2 SSR w1 wo D’ SLR D L2 Lo L1 H
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Shift in Demand w Then, we move along the LR labor supply curve. People don’t work as hard and wages go up even more. w2 SSR w1 wo D’ SLR D L2 Lo L1 H
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Intersection in Two Markets
SSR SSR SLR SLR D D Unskilled Skilled
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Intersection in Two Markets
SSR SSR SLR SLR D D Unskilled Skilled
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Intersection in Two Markets
SSR SSR SLR SLR D D Unskilled Skilled
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Intersection in Two Markets
SSR SSR SLR SLR D D Unskilled Skilled
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Intersection in Two Markets
SSR SSR SLR SLR D D Unskilled Skilled
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Compensating Differentials
Day and Night Differentials.
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Compensating Differentials
Day and Night Differentials. One study estimates that, in 1984, the average shift differential for night manufacturing work was 30¢ an hour, when the average wage rate in manufacturing was $9.18
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Compensating Differentials
Day and Night Differentials. High Risk versus Low Risk Jobs
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Compensating Differentials
Day and Night Differentials. High Risk versus Low Risk Jobs There are estimates that workers receive between $20 and $300 more per year for every one in ten thousand increase in the risk of being killed on the job.
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Compensating Differentials
Day and Night Differentials. High Risk versus Low Risk Jobs There are estimates that workers receive between $20 and $300 more per year for every one in ten thousand increase in the risk of being killed on the job. A firm employing 10,000 workers where the expected number of deaths is two per year, could save $200,000 - $3,000,000 per year in wages by cutting the number of fatalities in half.
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Computing Consumer Surplus
wo D No
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Computing Consumer Surplus
A The firms get A; the workers get B + C wo B wf D C No
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Computing Consumer Surplus
When we allow foreign labor, wages and the number of Americans working declines S wo wf D Nd Nt No
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Computing Consumer Surplus
A Firms get A+B+D+E Workers get C wo B B D E wf D C Nd Nt No
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Computing Consumer Surplus
A The total gain is D + E wo B B D E wf D C Nd Nt No
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The Monopoly Suppose we have a a monopoly industry.
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The Monopoly Suppose we have a a monopoly industry.
The firm still has a MPP curve
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The Monopoly Suppose we have a a monopoly industry.
The firm still has a MPP curve However we are not interested in VMP = MPP * P But MRP = MPP *MR
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The Monopoly The monopolist’s demand function is determined by MRP, not VMP. wo MRP= MPP x MR Lo
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The Monopoly The monopolist’s demand function is determined by MRP, not VMP. Since MR < P, MRP < VMP. wo MRP= MPP x MR Lo
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The Monopsonist A monopoly is a sole seller; a monopsonist is a sole buyer.
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The Monopsonist A monopoly is a sole seller; a monopsonist is a sole buyer. As a monopolist worries about MR, a monopsonist worries about MCF
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The Monopsonist S w N
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The Monopsonist S w* w N N*
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The Monopsonist S w* w N N*
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The Monopsonist MCF S VMP w VMP N
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The Monopsonist/Monopolist
MCF S VMP MRP w w* VMP MRP N* N
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Two Issues Is this exploitation?
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Two Issues Is this exploitation?
In the sense that the workers are not being paid the VMP, it is.
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Two Issues Is this exploitation? Price Discrimination
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Two Issues Is this exploitation? Price Discrimination
In the sense that the workers are not being paid the VMP, it is. Price Discrimination Confidential salaries Moving expenses and hiring bonuses
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End ©2003 Charles W. Upton
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