plugin-Chap20 - Krugman and Wells Chapter 20 Steven J....

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Krugman Krugman and Wells and Wells hapter 20 Chapter 20 Steven J. Haider EC201 Spring 2010
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Overview Competitive markets lead to efficient outcomes Chapters 3-7, 10-13: develops and uses competitive model If we intervened in the market (price/quantity controls or taxes), we lost efficiency Sometimes markets do not lead to efficient outcomes Models with market power (Chapters 14-16) Externalities (Chapter 17) Markets for public, common resource, or AS goods (Chapter 18) The labor market (Chap. 20) The focus of the class has been output markets (perhaps coffee): demanders are households and suppliers are firms We now turn to a particular factor market , the labor market: emanders are firms and suppliers are households demanders are firms and suppliers are households We use this chapter to review many of the ideas we have already covered EC201-14-p2
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Circular Circular flow from Chap. 2 flow from Chap. 2 Goods and services markets Example: food Demander: people in households Suppliers: firms like grocery stores, etc. Factor markets Example: labor market Demander: firms like universities Suppliers: people in households We’re now turning to the labor market—things are similar…but “backwards” EC201-2-p3
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The approach to this chapter Introduce some new ideas about the labor market and view pics about the output market review topics about the output market will follow Chapter 20 somewhat I will follow Chapter 20 somewhat Pointing to section headings to make it easy to follow I will diverge from Chapter 20 to review additional material Minimum wage: an example of a price floor Elasticity: what’s the predicted employment effect of the minimum wage The 1990 American with Disabilities Act: a mandated benefit that shifts the LD curve EC201-20-p4
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The basic picture: Fig 20.6 Axes: W and L rather than P and Q Suppliers of labor: households Demanders of labor: firms Perfect competition predicts W* and L* Markets could vary by location, skill/occupation/industry, etc. EC201-20-p5
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Roadmap Topic 1: Getting Behind the LD Curve In Chap 20 and relates to Chaps12/13 Topic 2: Shifting the LD Curve In Chap 20 and relates to Chap 3 opic 3: The LS Curve Topic 3: The LS Curve In Chap 20 and relates to Chaps 10/11 and Chap 3 Topic 4: The Wage Structure Chap 20 but no counterpart: we didn’t spend time pondering In Chap 20, but no counterpart: we didn t spend time pondering why similar goods are priced differently Topic 5: The Minimum Wage ot in Chap 20 but a direct application of price floors (Chap 5) Not in Chap 20, but a direct application of price floors (Chap 5) Topic 6: The American with Disabilities Act (ADA) Not in Chap 20, but a direct application of shifting LD curve hap 3 & Chap 20) (Chap 3 & Chap 20) Topic 7: Payroll tax holiday and employment We analyzed this in the case study “Pay Roll Tax Cuts” EC201-20-p6
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Topic 1: Getting Behind LD Curve Material from Chap 20 Value of the marginal product (p. 513)
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This note was uploaded on 05/18/2010 for the course ECONOMIC Ec 201 taught by Professor Haider during the Spring '10 term at MSU - Iligan Inst of Tech.

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plugin-Chap20 - Krugman and Wells Chapter 20 Steven J....

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