Chap013.3 - Slide 16 An Economy with Two Nonunionized Labor...

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3 Chapter 13: Labor Markets, Poverty, and Income Distribution Slide 13 ± Explaining Differences in VMP s z Human Capital ² An amalgam of factors such as education, training, experience, intelligence, energy, work habits, trustworthiness, and initiative that affect the value of a worker’s marginal product. Explaining Differences in Earnings Chapter 13: Labor Markets, Poverty, and Income Distribution Slide 14 ± Explaining Differences in VMP s z Human Capital Theory ² A theory of pay determination that says a worker’s wage will be proportional to his or her stock of human capital z Changes in demand can influence the value of human capital. Explaining Differences in Earnings Chapter 13: Labor Markets, Poverty, and Income Distribution Slide 15 An Economy with Two Nonunionized Labor Markets Employment in market 1 Wage ($/hour) Employment in market 2 125 9 75 9 D 1 = VMP 1 D 2 = VMP 2 Chapter 13: Labor Markets, Poverty, and Income Distribution
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Unformatted text preview: Slide 16 An Economy with Two Nonunionized Labor Markets Total employment (workers/day) S 200 9 D = VMP 1 + VMP 2 A nonunionized labor market W = $9 & Q = 200 Chapter 13: Labor Markets, Poverty, and Income Distribution Slide 17 The Effect of a Union Wage Above the Equilibrium Wage Employment in market 1 (unionized market) D 1 = VMP 1 125 W U = 12 Employment in market 2 (nonunionized market) 75 100 D 2 = VMP 2 9 W N = 6 9 100 Market 1 unionizes and sets W = $12 Employment falls to 100 Mkt 2 W falls to $6 and employment increases to 100 Loss in economic surplus Chapter 13: Labor Markets, Poverty, and Income Distribution Slide 18 Compensating Wage Differentials z The wage rate depends on the VMP and the working conditions. Explaining Differences in Earnings...
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This note was uploaded on 02/20/2012 for the course ECON 202 taught by Professor Brightwell during the Spring '08 term at Texas A&M.

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