lec17_wage_differences

# lec17_wage_differences - Chapter 14: Labor Markets,...

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Exams can be picked up from your TA during this week’s discussion section or office hours. (See course web page to find) Final grade will be based on numerical score, not letter grade from midterms, but rough guide for interpreting second midterm is as follows: • A: 89-100 • B: 78-88 • C: 60-77 • D: 45-59 • F: below 45 Final will be worth 200 points, with grade based on max{[test1+test2+final],[(1.5 x final)+max(test1,test2)]} Chapter 14: Labor Markets, Poverty, and Income Distribution A. Demand for labor Value of marginal product is the increase in revenue from hiring one more worker A profit-maximizing firm would hire labor up to the point where VMP equals the wage Conclusion: VMP and labor demand are just two names for the same curve VMP # of workers \$/worker (VMP) # of workers \$/worker (wage) labor demand 2 \$300 If 2 workers, VMP is \$300 2 \$300 If wage = \$300, demand is 2 workers Chapter 14: Labor Markets, Poverty, and Income Distribution A. Demand for labor B. Firm versus industry labor demand Firms of type 1 Firms of type 2 Labor demand for whole industry W N total = 100 x N1 + 100 x N2 N2 W VMP1 VMP2 W N1 At wage W, firms of this type would want to hire N1 workers At wage W, firms of this type would want to hire N2 workers If there are 100 firms of each type, at wage W, all firms together in this industry would want to hire 100 x N1 + 100 x N2 workers Industry-wide labor demand is horizontal summation of each individual firm’s VMP schedule \$ per worker \$ per worker \$ per worker # of workers # of workers # of workers industry

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## This note was uploaded on 04/19/2010 for the course ECON ECON 2 taught by Professor Hamilton during the Spring '09 term at UCSD.

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lec17_wage_differences - Chapter 14: Labor Markets,...

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