In unit 3 we studied the FOUR
PRODUCT MARKET MODELS to learn how product prices and
quantity are determined. We learned characteristics and
examples of each model. We discussed the differences between
their demand curves. We drew their short run equilibrium
graphs and found the long run equilibrium quantity,
allocatively efficient quantity, and the productively
efficient quantity. Finally we discussed other issues
associated with some of the models.
In unit 4 we will discuss the TEN
LABOR (or resource) MARKET MODELS to learn how wages
and the level of employment are determined. We will learn
what determines how much people will be paid and how many
people will be hired, i.e. the profit maximizing
quantity to hire. Then we will determine whether
businesses hire the allocatively efficient quantity of
labor.
We will finish the unit by looking at
two important issues associated with labor markets: income
inequality and immigration.
This lesson begins our study of the
labor markets by looking at the demand for resources, the
elasticity of demand for resources, and the first two labor
market models: (1) a competitive labor market working in a
competitive product market, and (2) a competitive labor
market working in an imperfectly competitive product market
(like a monopoly or oligopoly). We will find the
profit maximizing quantity of labor (and wage) that
will be hired and the allocatively efficient quantity of
labor that would maximize society's
satisfaction
We will use benefit-cost analysis
(BCA) throughout this unit. It would be useful to review BCA
in lesson 1d. For example, to find the profit
maximizing quantity of workers to hire firms will continue
to hire up to the point where MRP =
MRC.
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