lecture14 - Economics 103 Lecture # 14 The Labor Market...

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Economics 103 Lecture # 14 The Labor Market
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We’ve already discussed how the demand for labor comes from the marginal product of labor. This is often called a “derived demand” because it follows from the demand for the output.
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The supply of labor comes from the “demand for leisure.” Leisure is a good, and the price of leisure is the forgone wage. If you want 16 hours of leisure when the wage is $30, then you are working 8 hours. If the wage goes up to $40, the demand for leisure falls to 12, and the quantity supplied to the labor market increases to 12 hours.
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So the labor market has a supply and demand graph, just like other markets. Unemployment and shortages in the labor market are simply the result of wages out of equilibrium. The only thing different in this application is what is on the horizontal axis.
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1. What is the effect of a union? A union restricts the number of workers in an effort to raise wages. A union also tries to restrict the number of substitutes to
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This note was uploaded on 04/16/2009 for the course ECON 103 taught by Professor Hanafiahharvey during the Winter '08 term at Simon Fraser.

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lecture14 - Economics 103 Lecture # 14 The Labor Market...

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