Chapter 05 - Lecture Outline

Chapter 05 - Lecture Outline - ChapterFive ChapterFive...

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Chapter Five Chapter Five Demand for  Demand for  Labour Labour  in Competitive Labour   in Competitive Labour  Markets Markets Chapter 5 1
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Demand for Labour The theory of labour demand examines  the quantity of labour services the firm  desires to employ given:  the market-determined wage rate, or   the labour supply function the firm  faces The demand for labour is derived from  the output produced by the firm Chapter 5 2
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Employment Decisions Two time horizons for decision making:  Two time horizons for decision making:  Short-run Short-run  One or more factors of production cannot  be varied Long-run Long-run Firm can adjust all of its inputs—all factors  of production are variable factors Chapter 5 3
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Demand for Labour Demand for labour depends on the firms  objectives and constraints: Objective: Objective:     Profit Maximization Constraints: Constraints: Market structure Demand for the product (output) Factor prices Production function The decision making time Chapter 5 4
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Market Structures The structures of both the output  The structures of both the output  and labour markets influence the  and labour markets influence the  demand and supply of labour and,  demand and supply of labour and,  hence, the employment and the wage  hence, the employment and the wage  outcomes. outcomes. Chapter 5 5
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Categorizing the Structure of  Product Markets Industry (market) Structures Perfect Competition Monopolistic Competition Oligopoly Monopoly Chapter 5 6 decreasin g degree of competiti on
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Categorizing the Structure of Labour Markets Industry Structures Perfect Competition Monopsonistic Competition Oligopsony Monopsony Chapter 5 7 decreasin g degree of competiti on
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Characteristics of  Industry/Market Structures Categories are independent of each  other  16 possible combinations that affect  wage and employment outcomes Chapter 5 8
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The essence of the wage and  The essence of the wage and  employment decision by the firm can  employment decision by the firm can  be captured by examination of two  be captured by examination of two  extreme cases:  extreme cases:  For Labour Demand: For Labour Demand:
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Chapter 05 - Lecture Outline - ChapterFive ChapterFive...

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