6_Labor_Demand_1

6_Labor_Demand_1 - Introduction to Labor Economics Review...

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     Introduction to Labor Economics    
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 Review foundation labor supply model Labor demand model: Firm decision Short run Long run Labor demand case study: Put Illinois to Work
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  
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   L C U 0 L* C* h* Slope of BC  Slope of IC    Utility Maximization: 1. w = MRS 2. Make it affordable 
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  E w D S
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   Assume input and output markets are perfectly competitive – the firm is a price taker
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   Assume firm objective is to maximize profit.   Labor demand is derived demand Firms hire workers (and rent capital) to make products to sell for profit. Price and productivity of production inputs matters.
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     Gives the amount of output the firm can produce for different values of E and K
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 Example:    How much output is produced using 1 unit of capital and 4 units of labor?
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 Example:    How much output is produced using 1 unit of capital and 4 units of labor? q=20
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               q E
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                q E
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    Definition:  is  .
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        
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6_Labor_Demand_1 - Introduction to Labor Economics Review...

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