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Labor Economics > Topic 5 > Flashcards

Topic 5 Flashcards

1
Q

what characteristics does perfectly competitive market have

A
  1. Large number of firms hiring identical type of labor
  2. Numerous qualified people independently offering their services
  3. Neither firm or workers have control over the wages
  4. Perfect, costless information & labor mobility
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2
Q

What sort of a labor supply exists

A

Backwards bending, but normally positively sloped across normal wage ranges

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3
Q

What attracts people away from household production, leisure or previous jobs?

A

High relative wages

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4
Q

What does the height of the supply curve measure?

A

The opportunity cost using the marginal labor hour. The shorter the period, less elastic is the labor supply curve.

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5
Q

WHat happens to surplus in labor supply?Both employers / employees

A

More people looking for work - start to accept work for lower wages, employer hires more as MWC are lower

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6
Q

Draw labor market supply graph & explain

A

Check notes

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7
Q

What determine the supply of labor (shifting curve left or right) (5)

A
  • Other wage rates (occupations)
  • Non-wage income
  • Preferences for work versus leisure
  • Nonwage job aspects
  • Number of qualified suppliers (labor)
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8
Q

What determine the demand of labor (Shifting curve left or right) (4)

A
  • Product demand
  • Productivity
  • Price of other resources (e.g. substitutes for labor or gross substitutes or compliments, check the notes)
  • Number of employers
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9
Q

Illustrate the graph when there is a change in labor demand due productivity increase bc of innovation (what happens to the curve)

A

Check notes

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10
Q

Illustrate the graph when there is a change in labor supply due to increase in population (what happens to the curve)

A

check notes

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11
Q

what happens to employees applying to firms in a perfectly competitive environment. Answer & illustrate - when do they hire more? When are they maximising profit?

A

They are “wage takers” - firm will hire more if the additional revenue the worker generates MRP > MWC. Maximises profits by MRP = MWC - value of the product should match MWC

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12
Q

what is allocative efficiency?

A

This is obtained when society gets the largest amount of output from a given amount of labor. Society wants a max reward of every person working. Value out of employees

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13
Q

What does efficient allocation require?

A

VMP (Value of marginal product of labor) = Price of labor

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14
Q

What creates allocative efficiency?

A

Perfect competition in the product and labor market

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15
Q

Draw a wage and employment curve for monopolist market - what happens there, explain, to price, labor & value

A

Check your notes

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16
Q

What is a monopsony

A

A labor market where a single firm is the sole hirer of a particular type of labor.

17
Q

What does monopsonist have a control over?

A

Wage rate workers are paid by hiring more or less labor (as only one hirer, offer higher wages)

18
Q

Draw Monopsonist wage & employment graph ( & explain)

A

Check notes

19
Q

How do you calculate TWC for a firm

A

Number of units of labor times the wage rate

20
Q

What is MWC

A

the additional cost of hiring the last worker

21
Q

How can unions increase the price of their workers? (3)

A
  • Increase the demand for union labor
  • Restrict the supply of labor
  • Bargaining for an above equilibrium wage
22
Q

What results from union increase of prices? explain & illustrate

A

check notes.

Higher wages and employment

23
Q

What happens if union decreases the supply of labor? Illustrate & explain

A

Check notes.

Equilibrium wages will rise, but equilibrium quantity will fall

24
Q

How to increase union labor demand (5)

A

1 Increase product demand (lobby for tariffs on foreign goods)
2 Enhancing productivity (participation in labor management committees for productivity)
3 Influencing the prices of related inputs (lobbying for minimum wage hikes as they raise the price of substitutable less skilled non union labor)
4 Acts / Laws influencing how much union members are paid by contractors
5 Increasing number of employees (e.g. domestic production)

25
Q

How union limits labor supply (5)

A

1 Raising number of qualified suppliers of labor
2 lobby to reduce migration, child labor and lenght of working week
3 Limit entry into occupation through long apprenticeship
4 Occupational licensing
5 Raising non wage income, e.g. social security to decrease labor supply

26
Q

Illustrate how to bargain for above equilibrium wage - explain consequences

A

check notes

27
Q

Illustrate & explain bilateral monopoly in the labor market when facing union labor

A

Check notes

28
Q

Illustrate & explain wage determination by cobmodel for highly trained professionals

A

check notes

Labor Economics (4 decks)

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