Herzog gu computers produced 0 50 96 138 176 210 240

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 6 138 176 210 240 266 288 Marginal Product Value of MP (P=1000) 50 46 42 38 34 30 26 22 50,000 46,000 42,000 38,000 34,000 30,000 26,000 22,000 Labor Market February 5, 2014 9 / 40 Supply and Demand in the Labor Market Labor Demand Curve (Figure 5.2) Figure : Labor Demand Curve Ryan W. Herzog (GU) Labor Market February 5, 2014 10 / 40 Supply and Demand in the Labor Market Shift Factors There are two factors that shift the labor demand line: changes in price and changes in workers productivity. An increase in price will increase the value of each additional unit a worker produces. The firm will hire more workers at all wage rates. An increase in productivity (new technology, more education) will make each worker produce more stuff. This will make some workers that had a MPL less than wage more productive. Firms will hire more workers at all wage rates. A common fallacy is to assume that an increase in productivity will cause a reduction in labor. If workers are more productive, it takes fewer workers to produce the same amount, but now that workers are more productive the cost of production will also decrease. Firms will take advantage of the lower cost production. Ryan W. Herzog (GU) Labor Market February 5, 2014 11 / 40 Supply and Demand in the Labor Market Labor Demand - Increase in Price (Table 5.2) Table : Production and Marginal Product for Computers Number of workers 0 1 2 3 4 5 6 7 8 Ryan W. Herzog (GU) Computers Produced 0 50 96 138 176 210 240 266 288 Marginal Product Value of MP (P=1500) 50 46 42 38 34 30 26 22 75,000 69,000 63,000 57,000 51,000 45,000 39,000 33,000 Labor Market February 5, 2014 12 / 40 Supply and Demand in the Labor Market An Increase in Price (Figure 5.3) Figure : Labor demand curve following an increase in the price level Ryan W. Herzog (GU) Labor Market February 5, 2014 13 / 40 Supply and Demand in the Labor Market Labor Demand - Increase in Productivity (Table 5.3) Table : Production and Marginal Product for Computers Number of work...
View Full Document

Ask a homework question - tutors are online