Chapter 07 - Lecture Outline

Chapter 07 - Lecture Outline - Chapter Seven Wages and...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter Seven Wages and Employment in a Single Labour Market Chapter 7 1
Background image of page 1

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

View Full DocumentRight Arrow Icon
Competitive Firm’s Demand Perfect competition in both the product and the labour markets Assumptions: homogeneous type of labour price taker and wage taker Supply of labour is perfectly elastic (horizontal) at the wage rate Firms can employ all the labour they need at the market wage rate Market wage rate is set by the aggregate labour market Chapter 7 2
Background image of page 2
Competitive Product and Labour Markets Chapter 7 3
Background image of page 3

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

View Full DocumentRight Arrow Icon
Short Run vs. Long Run In the short run a firm (firms) may raise its (their) demand for additional workers as demand for its (their) product increases. Given the upward sloping labour supply curve, the wage rate as well as employment will increase in short run. Short-run wage increases can be a market signal, resulting in increase in the labour force in long run (labour supply curve shifts to the right). Chapter 7 4
Background image of page 4
The Labour Market in the Short Run and Long Run Chapter 7 5
Background image of page 5

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

View Full DocumentRight Arrow Icon
Equilibrium in a Competitive Market Characteristics of the long run equilibrium and the market-clearing model (neoclassical) for markets with homogeneous workers and homogeneous jobs, wages will be equalized across workers absences of “involuntary unemployment” no queues for jobs or rationing of jobs Chapter 7 6
Background image of page 6
In Reality… The market-clearing model is not entirely true Wages do not adjust quickly to clear the market Involuntary unemployment is frequent Large wage differentials exist across
Background image of page 7

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

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 30

Chapter 07 - Lecture Outline - Chapter Seven Wages and...

This preview shows document pages 1 - 8. Sign up to view the full document.

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