ECON 1203 CHAPTER 11 MARKETS FOR FACTORS OF PRODUCTION

shifts of the labors supply curve

1. population changes 2. Changes in workers preferences and tastes 3. Opportunity costs

taste-based discrimination

discrimination that arises due to people's prejudices against a group of people

Differences in Human Capital

each person's investment in themselves leading to the ability to be more productive (ex. education, job training, health)

employers cannot know a

potential workers productivity with certainty

if labor and technology are complements,

the labor demand curve shift to the right

Population changes

the more people there are, the greater the supply of labor, so the labors supply curve shifts to the right

In competitive labor market, the profit-maximizing number of workers that a firm will hire occurs where the

value of marginal product of labor is equal to the market wage

Differences in compensating wage differentials

wage premiums necessary to attract workers into occupations that have unattractive aspects (ex. window washer, worker on alaska pipeline, garbage collector)

How does the market for inputs like labor differ from the market for goods and​ services? ​

-The demand for inputs is derived from the demand for final goods and services. -Firms are sellers in the market for goods and​ services, while individuals are sellers in the market for inputs. -Firms are buyers in the market for​ inputs, while individuals are buyers in the market for goods and services.

changes in workers preferences and tastes

-greater proportion of women in the labor force -greater proportion of older workers wanting to continue working rather than retire

job training

-industry specific training increases productivity within an entire industry -Firm specific training increases productivity for just the hiring firm

Why wages are different

1. Differences in human capital 2. Differences in compensating wages 3. The nature and extent of discrimination in the job market

shifts of the labor demand curve

1.) price of the good the firm produces 2.) Technology used in production

We can show that a​ profit-maximizing firm will hire the number of workers such that the wage is equal to the value of the marginal product of labor.​ But, as the text showed in an earlier​ chapter, a​ profit-maximizing firm will produce the quantity of output such that price equals marginal cost.

No, the decision rule regarding the optimum employment level yields the level of employment exactly necessary to produce the output level where price​ = marginal cost.

Equal pay for work of comparable worth is the idea that certain​ jobs, though completely​ different, must have the same pay because they are deemed to be of similar value. For​ example, an​ X-ray technician's job may be deemed to be as valuable as a dental​ assistant's job and​ therefore, both these jobs should be paid the same salaries. Implementing equal pay for comparable worth has been suggested as a measure that would reduce discrimination and inequality in the job market. Do the authors of the textbook​ agree? What could be the other possible effects of such a​ policy?

No. Just as central planning failed miserably to replicate the accomplishments of the invisible​ hand, so too would any attempt to employ similarly ill suited​ "officials" to gauge the value of the marginal products of the myriad jobs in a modern and fluid economy. Resources that might otherwise be deployed in productive activities may instead be utilized to influence the​ wage-setting decision process. Wages may be set​ inappropriately, producing shortages in some occupations and surpluses elsewhere. The officials charged with the task of setting wages would be subject to intense lobbying and may become corrupt.

Some people thinks it's unfair that athletes like LeBron James earn a lot more than people who add so much more value to society like soldiers What do you think explains this wage​ differential?

The economic output of athletes like LeBron James adds more economic value to firms than those services provided by soldiers

statistical discrimination

discrimination that rises due to expectations about a group of people

value of marginal production of capital (VMPK)

how much each additional unit of capital contributes to the firm's revenues

value of marginal products of labor

how much each worker contributes to revenue (equal to MP * Output Price)

Opportunity Costs

if the alternatives to working change overall or for a particular industry or firm, the labor supply curve will shift

price of the good the firm produces

if the price of the output increases, each worker is worth more the firm

land

includes other natural resources

physical land

lasting input into the production process

labor and technology could also be substitutes as technology could replace workers so the labor demand curve shifts

left

example of opportunity costs

the affordable care act could cause some workers to leave the labor force because they can get insurance coverage outside of employment

technology used in production

the other component is worker productivity technology could make workers more productive