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chapter_1 - 6 Three Actors Government Imposes taxes,...

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  1 Chapter 1 Introduction to Labor Economics
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  2 Why study Labor Economics? Human resources allocate substantial time and energy to labor markets Labor economics studies how labor markets work Labor economics helps us understand and address many social and economic problems facing modern societies
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  3 Basics of the Labor Market Participants are assigned motives: Workers look for the best job Firms look for profits Government uses regulation to achieve goals of public policy Minimum wages Occupational safety
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  4 Three “Actors” -Workers The most important actor; without workers, there is no “labor” Desire to optimize (to select the best option from available choices) to maximize well- being Will want to supply more time and effort for higher payoffs, causing an upward sloping labor supply curve
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  5 Three “Actors” -Firm Decide who to hire and fire Motivated to maximize profits Relationship between price of labor and the number of workers a firm is willing to hire generates the labor demand curve
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Unformatted text preview: 6 Three Actors Government Imposes taxes, regulations Provides ground rules that guide exchanges made in labor markets 7 Summary: the Three Actors T h r e e A c t o r s i n t h e L a b o r M a r k e t W o r k e r s S u p p l y l a b o r f o r p a y o f f F i r m s D e m a n d l a b o r g i v e n p r i c e o f l a b o r a n d d e s i r e f o r p r o f i t s G o v e r n m e n t T a x e s R e g u l a t i o n s R u l e s o f e x c h a n g e L a b o r M a r k e t 8 Why Do We Need a Theory? Explain and understand how labor markets work Focus on the essential variables while leaving out other, less crucial, factors Create a model that helps explain the theory 9 Positive vs. Normative Economics Positive economics Addresses the facts Focus on what is Questions answered with the tools of economists Normative economics Addresses values Focus on what should be Requires judgments 10 End Chapter 1...
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chapter_1 - 6 Three Actors Government Imposes taxes,...

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