To produce additional output, hire more labor.
As L rises, _______
causing W/MPL to _____
causing MC to ______
Hence, ____________ and ____________are two sides of the same coin.
MPL falls (diminishing returns)
rise
rise
diminishing marginal product
increasing marginal cost
The competitive firm’s rule for demanding labor:
Hence, ________ & ________are two sides of the same coin.
P x MPL (VMPL) (Mr) = W (Mc)
input demand
output supply
Labor Supply (2)
Trade-off between work and leisure: The more time you spend working, the less time you have for leisure.
The opportunity cost of leisure is the WAGE.
The Labor Supply Curve: An increase in Wage (3)
is an increase in the opp. cost of leisure.
People respond by taking less leisure and by working more.
supply curve is relatively inelastic
Things that Shift the Labor Supply Curve (3)
Changes in tastes or attitudes regarding the labor-leisure trade-off (Gen Z- left & Melenials- right)
Opportunities for workers in other labor markets
Immigration (right)
Equilibrium in the Labor Market:
The wage adjusts to _________
The wage always EQUALS ______.
balance supply and demand for labor.
VMPL
more technology then we need to hire more people to run the machines so shift to the _________
right
the price a person pays to OWN that factor indefinitely
the price a person pays to use that factor for a limited period of time
purchase price
rental price
The determination of the rental prices of capital and land is analogous (compareable) to the ….
The wage is the ….
determination of wages
rental price of labor.
