L1.4R - Econ 102 Fall 2006 Lecture 1.4 The classical model...

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1 1 Econ 102 Fall 2006 Lecture 1.4 The classical model of output employment and growth 2 Things to learn in this lecture z How a competitive labor market works z How TFP movements explain The secular increase in the wage and approximate constancy of labor hours Business cycle movements in wages, hours and GDP z A model of TFP 3 Preferences, endowments, technology z Main idea of the classical model: Business cycles are caused by fluctuations in the fundamentals z Fundamentals consist of Preferences Endowments Technology
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2 4 Preferences z Preferences are non-economic factors that shape our economic choices z Examples include Religion Culture Fashion 5 Example of a change in preferences z In 1950 35% of women worked outside of the home z In 2000 60% of women worked outside the home z This is an example of a factor that shifted the labor supply curve 30 35 40 45 50 55 60 65 55 60 65 70 75 80 85 90 95 00 Female Labor Force Particiapation Percentage of women over 20 6 Technology z In 1819 it took four weeks to cross the Atlantic by steamship z In 1965 it took 3 hours and thirty five minutes on the Concord z This is an example of a change in technology
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3 7 Endowments z Endowments consist of the natural resources of a country including Land Forests Minerals People 8 A model of the labor market z The model has three equations Labor demand Labor supply Production function 9
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This note was uploaded on 04/11/2009 for the course ECON 102 taught by Professor Serra during the Winter '08 term at UCLA.

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L1.4R - Econ 102 Fall 2006 Lecture 1.4 The classical model...

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