ECON112-4-10-08-LaborMarkets

ECON112-4-10-08-LaborMarkets - product discrimination-...

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Sheet1 Page 1 ECON112,4/10/08 LABOR MARKETS minimum wage: minimum wage leads to a wage floor, which leads to excess supply of labor excess supply of labor leads to unemployment there is a theory that when minimum wage goes up, employment does not change, but substitition occurs labor substitution- no difference in unemployment, but different employees are hired e.g. McDonalds responds to raise in minimum wage by hiring older workers, since older workers are considered more productive, and are now willing to work for the higher wage. teenagers get the pink slip discrimination: wage discrimination- people of same productivity get different wages employment discrimination- people of same productivity level don't get hired occupational discrimination- people are pushed into different jobs
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Unformatted text preview: product discrimination- people of same ability to pay pay higher prices in perfect competition, discrimination is impossible monopoly- single seller, many buyers e.g. Microsoft (almost) monopsony- single buyer, many sellers e.g. Canadian Wheat Board NOTES FROM DISCUSSION-resources are used to produce goods and services which are sold in markets-market for labor: demand and supply exist 1) demand- concerns firms supply- concerns workers substitution effect: wages increase, price of leisure increases leading to more working income effect: wages increase, demand for leisure increases leading to consuming more leisure/working less if SE>IE, people work more and leisure less if IE>SE, people work less and leisure more...
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