chapter_10B_L

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Hours of work supplied
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Labour supply in aggregate
If we consider the economy as a whole, or an industry a higher real wage rate also encourages a higher participation rate (the fraction of the
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Readings about this chapter
Zhang: Chapter 8,P263-279 Nicholson: Chapter 21, P577-604 Chapter 22,23
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Chapter 10 includes:
10.1 Introduction to Factor Market 10.2 The Market Demand for the Factors of Production 10.3 Labor Market Equilibrium 10.4 Other Factors of Production - Land and Capital 10.5 Monopoly and monopsony power in the labour market
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其 推 导
劳 动 供 给 曲 线 及
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The individual's supply curve of labour
SS2
Real wage
For the labour supply SS1 curve SS1, an increase in the real wage induces higher labour supply. Whereas for SS2, there comes a point where a higher wage induces less hours of work to be supplied: labour supply is backward-bending.
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The Demand for Inputs in General
if the firm buys all of its inputs, say,
Labor Land Capital
in competitive markets (is a price taker in all input markets) then:
SL L1 L0
D'L
DL
Quantity of labour
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A change in wages in another industry
S'L
Wage
Again starting in equilibrium, An increase in wages in another industry attracts labour, so industry supply shifts to the left – The new equilibrium is at W2, L2.
SL L0
DL
Quantity of labour
For a given output demand curve, industry demand for labour slopes down Equilibrium is W0, L0.
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Labour-Market Equilibrium: Shifts in the Supply and Demand of Labour
The wage adjusts to balance the supply and demand for labour. Shift in Supply of labour: may be caused by increased number of available labour. Shift in Demand for labour: may be caused by an increased demand for the final product produced by labour.
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The supply of labour in the Labour market
The LABOUR FORCE(劳动力):
all individuals in work or seeking employment
Labour supply
for an individual, the decision on how many hours to offer to work depends on the real wage(真实工资) an individual's attitude towards leisure and income determines if more or less hours of work are supplied at a higher real wage rate.
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Labor Supply Curves for Individuals Eventually Bend Backward
As wages rise, the market supply curve slopes upward For an individual, a very high wage may cause that person to wish to work fewer hours
Income effect of higher wages predominates over the substitution effect(高工资所带来的收入效用 大于替代效用)
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The individual's supply curve of labour
An increase in the real wage causes the change of the hours of the time. It leads to a substitution effect or pure relative price effect that makes people want to work more. But a higher real wage also tends to raise people's real income. This has a income effect. Since leisure is probably a luxury good, the quantity of leisure demanded increases sharply when real incomes increase. This income effect tends to make people work less. The overall effect of a real wage rise, depends on which effect is larger.
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A shift in product demand
Beginning in equilibrium, DL D'L
Wage
SLቤተ መጻሕፍቲ ባይዱ
W0 W1
a fall in demand for the product also shifts the derived demand for labour to D'L The new equilibrium is at W1, L1.
Chapter 10
Pricing in Factor Market
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Chapter 10 includes:
10.1 Introduction to Factor Market 10.2 The Market Demand for the Factors of Production 10.3 Labor Market Equilibrium 10.4 Other Factors of Production - Land and Capital 10.5 Monopoly and monopsony power in the labour market
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Wage Determination in Labor market
The demand for labor curve has been determined Now add an analysis of labor supply We can derive the equilibrium wage rate that workers earn in an Market
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Labour market equilibrium for an industry
The industry supply curve SLSL slopes up
Wage
DL
SL
W0
higher wages are needed to attract workers into the industry
population of working age who joint the labour market)
so labour supply is likely to be upward-sloping
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Labour-Market Equilibrium
Labour supply and labour demand together determine the equilibrium wage, and shifts in the supply or demand curve for labour cause the equilibrium wage to change. Profit maximization by competitive firms demanding labour, ensures that the equilibrium wage always equals the value of the marginal product.