2023Ch13SumMcBr - Labor and Wage Determination Chapter 13...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Labor and Wage Determination Chapter 13
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Outline Nominal wages vs. real wages The supply of labor The demand for labor The equilibrium wage Labor demand and supply factors Wages under perfect competition Wages under imperfect competition Wage differentials Labor market laws
Background image of page 2
Nominal wages and real wages In the remaining chapters of the course we will discuss specific resource markets. This chapter deals with the labor market. As you know, the term for the payment to labor is wages. But there is a difference between nominal wages and real wages. A nominal wage is strictly a dollar amount per some time period (hour, day month or even year). Your real wage would be what you can buy with your nominal wages. Obviously, a change in your nominal wages will affect the amount of goods and service you can buy, but so does the price level. Given a certain nominal wage, if prices increase, real wages (your buying power) would decrease . If prices decrease, real wages would increase. Thus, there is an inverse relationship between price changes and real wage changes.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The supply of labor In our discussion of labor markets, whenever “wages” is used it will refer to nominal wages and not real wages. Also, “wage rate” may be used in the place of wages. Wages influence the quantity supplied of labor. For example, if the demand for accountants should increase, raising the wages for accountants, then the quantity supplied of accountants will increase. Thus, labor supply curves generally slope upward just like for products. However, there is the possibility that the labor supply curve could by backward bending for certain individuals. Generally, when wages increase, the quantity supplied of labor increases. But if wages become very high, people may start to think about substituting more leisure for work and the quantity supplied would actually decrease when wages become that high.
Background image of page 4
The demand for labor The wage rate also influences the quantity demanded of labor. If the minimum wage were to increase, for example, businesses probably would decrease the number of workers they use who would be paid that wage (expenses would rise and cut into profits, causing firms to use less labor). Thus, as wage rates increase, the quantity demanded of labor would decrease, other things remaining the same, making the demand curve for labor slope downward. Again, this is similar to what was discussed in our analysis of the effects of price changes on products. The law of demand, therefore, applies to resources just like it does for products.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The equilibrium wage The equilibrium wage rate is the wage at the intersection of the demand and supply curves for labor. At this point, quantity demanded equals the quantity supplied for labor. The equilibrium wage rate will change based on changes
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 21

2023Ch13SumMcBr - Labor and Wage Determination Chapter 13...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online