Introduction to <a href="/keyword/labor-econ/" >labor econ</a> omics Chapter 1 The study of <a href="/keyword/labor-econ/" >labor econ</a> omics requires a solid foundation in microeconomics. Review material may be found at: http://www.oswego.edu/~kane/eco101.htm Microeconomics background The study of <a href="/keyword/labor-econ/" >labor econ</a> omics requires a solid foundation in microeconomics Review material may be found at http://www.oswego.edu/~kane/eco101.htm Labor market vs. other markets labor services are rented, not sold, Labor market vs. other markets labor services are rented, not sold, labor productivity is affected by pay and working conditions, Labor market vs. other markets labor services are rented, not sold, labor productivity is affected by pay and working conditions, and the suppliers of labor care about the way in which the labor is used. Positive vs. Normative Economics Positive economics an attempt to describe how the economy operates using the scientific method. Positive vs. Normative Economics Positive economics an attempt to describe how the economy operates using the scientific method. Normative economics relies on value judgments to evaluate the overall functioning of the economy. Positive economics abstraction Positive economics abstraction ceteris paribus assumption Positive economics abstraction ceteris paribus assumption test of model based on predictions, not assumptions Fundamental positive economic concepts scarcity Fundamental positive economic concepts scarcity rational selfinterest Fundamental positive economic concepts scarcity rational selfinterest utility maximization Fundamental positive economic concepts scarcity rational selfinterest utility maximization profit maximization Normative economics interpersonal comparisons of utility are impossible Normative economics interpersonal comparisons of utility are impossible Pareto improvement Normative economics interpersonal comparisons of utility are impossible Pareto improvement Pareto efficiency (aka Pareto optimality) Normative economics interpersonal comparisons of utility are impossible Pareto improvement Pareto efficiency (aka Pareto optimality) problems with the Pareto optimality criterion Markets and Pareto optimality under ideal conditions, markets result in Pareto efficient outcomes Types of Market failure imperfect information, Types of Market failure imperfect information, transaction barriers, Types of Market failure imperfect information, transaction barriers, p...