ln3_earnings

Ln3_earnings - Lecture 3 Earning 1 First background on a"supply curve shows how much is produced or offered of something compared to price of that

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Lecture 3: Earning 1. First, background on a "supply curve" - shows how much is produced, or offered, of something compared to price of that something. Idea is, if producers can receive more from the price, they'll want to produce and sell more. Can also think of this for labor. Labor supply shows how many people want to work at a job when different salaries are offered for that job. Expect that the higher the salary, the greater the labor supply: 0 20 40 60 80 100 120 5 8 10 13 18 millions of workers annual salary ($) 2. Fundamentals Salary (or wage) is a price, just like the price of a bushel of corn or the price of a gallon of gasoline. A salary is the price of labor - the price paid to hire someone for a stated time period. Like any price, a salary is determined by the interaction of the supply of labor and the demand for labor. These supply and demand curves look like any supply and demand curve. More people will offer their labor for hire the higher the salary of the job, and more businesses will want to hire labor the lower the salary of the job. Where demand and supply curves come together - intersect - gives equilibrium in the labor market - the salary paid and the number of people hired. From the perspective of a business, its demand for labor depends on the revenue the worker can earn for the business. So, the demand for labor is a "derived demand" from what the business can make and sell using the workers. Workers who earn more revenue for the business are more valuable, and demand for these workers will be greater.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/08/2008 for the course ARE 201 taught by Professor Eryuruk during the Fall '08 term at N.C. State.

Page1 / 5

Ln3_earnings - Lecture 3 Earning 1 First background on a"supply curve shows how much is produced or offered of something compared to price of that

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online