Chapter 19 Work and the Labor Market

Chapter 19 Work and the Labor Market - C hapter 19 Work and...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 19 Work and the Labor Market Labor market is a factor market in which individuals supply labor services for wages to other individuals and to firms that need labor services. Incentive effect how much a person will change his or her hours worked in response to a change in the wage rate. The incentive effect is determined by the value of supplying one’s value time to legal market activities relative to the value of supplying one’s time to nonmarket activities. the higher the wage, the higher the quantity of labor supplied higher incomes make people richer, and richer people can afford to choose more leisure The decision, based on the principle of rational choice, to work more hours when your pay goes up is called the substitution effect. o Substitute work for leisure because the price of leisure has risen o The decision to work fewer hours when your pay goes up, based on the fact that you’re rich and can live a better life is the income effect After tax income determines how much you work When your earned income goes up, your benefits from these programs go down Elasticity of the market supply curve is determined by the elasticity of individuals supply curves and by individuals entering and leaving the labor
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

Chapter 19 Work and the Labor Market - C hapter 19 Work and...

This preview shows document pages 1 - 2. Sign up to view the full document.

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