Chapter 20 - Chapter 20 Labor: the human input Wage...

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Chapter 20 Labor: the human input Wage determination in competitive labor markets the demand for labor and the determination of wages o the marginal revenue product of labor is the increase in the employer’s total revenue that results it hires an additional unit of labor. influence on MRP l : shifts in the demand for labor o investment in human capital is any expenditure on an individual that increases that person’s future earning power or productivity technical change, productivity growth and the demand for labor o marginal revenue product of labor in widget production = price of widgets multiplied by the worker’s marginal widget output MRP = P (of widgets) x MPP the service economy and the demand for labor the supply of labor rising labor force participation an important labor supply conundrum o substitution effect the substitution effect of a wage increase it the resulting incentive to work more because of the higher relative reward to labor o income effect the income effect of a rise in wages is the resulting rise in
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Chapter 20 - Chapter 20 Labor: the human input Wage...

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