Chapter 5: Labor Market

Shifts in Labor Demand

At least three types of economic events can cause a shift in the demand for labor, so that a higher or lower quantity of labor is hired at every salary or wage:changes in the quantity of output produced with that kind of labor, changes in how the output is produced, and government regulations affecting firms that demand labor.

What affects the curve and not shift the curve?

Change in salary will affect the curve but there will be no shift in the curve.

Equilibrium in the Labor Market

Where the demand and supply intersect.

The law of supply in labor markets

The law of supply in labor markets states that a higher price of labor leads to a higher quantity of labor supplied.

The law of demand in labor markets

A higher salary or wage leads to a decrease in quantity of labor demanded and a lower salary or wage leads to an increase in quantity of labor demanded.

Shifts in Labor Supply

Job perception and Government.

Usury Laws

Laws that impose an upper limit on the interest rate the lenders can change.

Price Floors

Minimum wage is a price floor that makes it illegal for an employer to pay employees less than a certain hourly rate.

Price Ceiling and Labor

Price ceilings are not popular because they do not work politically. Preventing people from earning money is never well seen.

People that are in the financial capital think what?

They usually want the money now and they debate on how much money they should save.

What happens when there is shortage in labor?

This creates higher wages.

What happens when there is excess supply in labor?

This creates lower wages.

What happens when the price of labor is not at equilibrium?

When the price of labor is not at the equilibrium economic incentive tend to move salaries towards the equilibrium.

Shifts in demand and supply in the financial capital.

Economic factor can shift demand or supply of financial capital if it alters the balance that people wish to strike between present and future.

How does technology affect the demand and supply?

Low skill labor is affected negatively by technology because it is looked at like a substitute. High-skill management is affect positively by technology. Evaluating this you can look at how supply and demand goes up or down.

Equilibrium in Financial Capital Markets

Lower interest rate in order to get more business and push interest rate down toward the equilibrium.