9-19-07 - Chapter 2-7 Classical Model Larger Demand...

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Chapter 2-7 Classical Model Larger Demand -Marginal product diminishes as labor increases -firms hire labor until MP of last labor hired=real wage MP=labor demanded Labor Supply -as real wage increases, more expensive to spend time on leisure -when rela wage changes, move along curve, "change in quantity of labor supplied" -when something else changes, whole curve shifts, "change in labor supply" 1)change in size of population 2)change in value of leisure (labor taxes) Classicla model equilibrum -labor market is in equilibrum, when labor supply=labor demand -when labor supply=labor demanded, evonomy is at full employeement -when economy is at full employment, real GDP=pet GDP -economy producing efficiently (on PPF) -also allocativly efficient -could produce more with more labor -but then MC of labor>MP of labor -then not allocatially efficient -even when labor market is in equilibrum, still unemployement -at full employemnt--unemployment rate=natura rate -when real wage>equilibrium wage
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This note was uploaded on 12/12/2008 for the course ECON 29486 taught by Professor Denniswilson during the Fall '06 term at Western Kentucky University.

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9-19-07 - Chapter 2-7 Classical Model Larger Demand...

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