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benjamin5_PPT_05 - Chapter Five Demand for Labour in...

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Chapter 5-1 Chapter Five Demand for Labour in Competitive Labour Markets
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Chapter 5-2 Chapter Focus Labour demand curve Short and long run Demand for Labor Elasticity
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Chapter 5-3 Demand for Labour Factors of production inputs into the production of final goods Linked to the firms demand for goods/services Derived demand
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Chapter 5-4 Employment Decisions Short-run – one or more factors of production cannot be varied (e.g., k) Long-run – firm can adjust all of its inputs (N and K) State of technical knowledge is assumed to be fixed
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Chapter 5-5 Demand for Labour The quantity of labour services the firm would employ at each wage: N=N(w) Depends on the firms objectives and constraints Objective is to maximize profits
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Chapter 5-6 Firm’s Constraints Demand for product (output) Supply of labour (and other factors of production) Production function ( the maximum output given the various combinations of inputs) Fixed quantity of one or more factors of production (short run only)
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Chapter 5-7 Theory of Labour Demand Examines the quantity of labour the firm desires given the market-determined wage rate Assume: The firm is a perfect competitor in the labour market.
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Chapter 5-8 Market Behaviour A firm’s behaviour in the product market affects demand for labour wage rate employment decisions The structure of the labour market affects supply curve - amount of labour available to the firm at various wage rates
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Chapter 5-9 Categorizing the Structure of Product Markets Industry Structures perfect competition monopolistic oligopoly monopoly decreasing degree of competition
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Chapter 5-10 Categorizing the Structure of Labour Markets Industry Structures perfect competition monopsonistic competition oligopsony monopsony decreasing degree of competition
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Chapter 5-11 Characteristics of Industry Structures Categories are independent of each other 16 possible combinations that affect wage and employment outcomes
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Chapter 5-12 Demand for Labour in the Short Run Perfect Competition Case
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Chapter 5-13 Production Function Firms use factors of production (labour- N, capital -K) to produce Q (quantity of a single output) Q=F(K,N) In the short-run K is fixed so the production function is simply a function of N
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