Professional Documents
Culture Documents
2011
6
THE ECONOMICS OF LABOR MARKETS
18
Copyright2004 South-Western
Price of
Apples
Wage of
Apple
Pickers
Supply
Supply
Demand
Demand
Quantity of
Apples
Quantity of
Apple Pickers
06.09.2011
Quantity
of Apples
Production
function
300
280
240
180
100
Copyright2004 South-Western
Quantity of
Apple Pickers
Copyright2003 Southwestern/Thomson Learning
MPL = Q/L
Q/
MPL = (Q2 Q1)/(L2 L1)
06.09.2011
Quantity
of Apples
Production
function
300
280
240
180
100
Quantity of
Apple Pickers
Copyright2003 Southwestern/Thomson Learning
To maximize profit, the competitive, profitmaximizing firm hires workers up to the point
where the value of the marginal product of
labor equals
q
the wage.
g
VMPL = Wage
06.09.2011
Value
of the
Marginal
Product
Market
wage
Profit-maximizing quantity
Quantity of
Apple Pickers
Copyright2003 Southwestern/Thomson Learning
Output Price
Technological Change
Supply of Other factors
Wage
(price of
labor)
Changes in Tastes
Changes in Alternative Opportunities
Immigration
Quantity of
Labor
Copyright2003 Southwestern/Thomson Learning
06.09.2011
Wage
(price of
labor)
Supply
Equilibrium
wage, W
Demand
Quantity of
Labor
Equilibrium
employment, L
Wage
(price of
labor)
1. An increase in
labor supply . . .
Supply, S
S
W
W
2. . . . reduces
the wage . . .
Demand
Quantity of
Labor
Wage
(price of
labor)
Supply
W
1. An increase in
labor demand . . .
W
2. . . . increases
the wage . . .
D
Demand, D
Quantity of
Labor
06.09.2011
Copyright2004 South-Western
Supply
Supply
Demand
Demand
Quantity of
Land
Quantity of
Capital
06.09.2011
Summary
Summary
06.09.2011
Summary
Summary