ECO-320 Test #1

What is opportunity cost?

the value of the best alternative forgone

What is neoclassical economics?

"mainstream" economics concerned with decision-making under conditions of SCARCITY which means there are not enough resources available to satisfy everyone's wants, choices have to be made about how these resources will be used

Know the advantages (middle of page 61) and disadvantages (pages 48-51) to specialization and exchange (the comparative advantage model) in marriage. There is really only one advantage, which is what in economic terms?

- Advantage to specialization and exchange: ----> End result is both people have more of everything (Comparative advantage) -Disadvantage to specialization and exchange: ----> Sharing housework (are women better at ALL housework? What if you don't like the thing you're good at? Misallocation of resources. Some tasks are more efficiently performed by 2 people.) ----> Life Cycle changes (Simple CA model ignores change over time) ----> Cost of interdependence (Need to know other's role. When one does the other may not know how to do their job. Example is a widow who can't finance) ----> Specialization CA model doesn't account for differences in taste and preference. ----> Domestic violence (specialization limits options for escape)

35) What was the gender pay ratio in 1890 and in 1930? The rise over those 40 years was largely due to what?

- Gender pay ratio = women's pay / men's pay - 1890 → 46% - 1930 → 56% - the relative increas in wages for women

What is the transactional cost model and how does it relate to people getting married?

- Marriage is a way to minimize transaction cost - provides rules about the nature of relationship and rights of each if break up. - Marriage as an implicit contract provides incentives for couples to make substantial marriage-specific investments. - Marriage might be seen as a contractual affiliation that is "flexible enough to allow adaptive sequential decisions making in the face of unfolding events". Ease of making repeated decisions with someone you know very well verse with a stranger for each new decision- lower transactional cost to make decisions for married couple (Remember lifetime of first dates→ transactional cost are high)

13) Between which two years do you see the largest increase and by how much? How is the trend between 2000 to 2015 different from the trend of what happened in the decades before them?

- largest increase --> 1970 to 1980 by 8.2 - from 2000 to 2015 --> the % of women in the labor force began decreasing and amount decreased by increased overtime

29) Distribution of Workers by Occupation, Race and Gender graph on page 32

- white women dominated professional, clerical, sales, and manufacturing jobs - Non-white women dominated domestic service and agriculture jobs - 90% of black women worked either as domestic servants or as farm laborers compared to the only 42% of white women. It was also the case that foreign-born white women were overrepresented in manufacturing and domestic service compared with native born white women.

20) What is the market cost approach to estimating nonmarket production?

----> Alternatively, market cost approach, sets the value of non-market production equal to the cost of hiring someone to do it. ----> This is also referred to as (specialist method) ----> A problem with this is that it is unlikely a homemaker can perform all these tasks as good as a specialist. ----> Difficult to come up with a price for non-market work. ----> The 9/11 example we did in class did not take into account the families who lost someone who also did a large portion of the nonmarket job at the home.

Be able to explain some reasons people would form families even if there are no advantages from specialization and exchange (comparative advantage model).

----> Economies of Scale: means that as you increase the scale (size) of the production unit (household) can result in increased output but at a decreasing per unit cost. Meaning two people living together have less than double the cost of one person. ----> Public Good: has the unique characteristics that the consumption or enjoyment by one person does not diminish the consumption or enjoyment of some items by others. Watching TV. ----> Externalities in Consumption: This occurs when the consumption of a good or service by one of the partners affects the well-being of the other who does not consume. Wife is happier when the husband purchases a suit because he looks good.→ negative externalities are smoking. ----> Gains from shared consumption: Meaning individuals derive greater utility (satisfaction) from doing activities with others who have a shared interest rather than doing them alone. ----> Marriage specific investments: refers to the skills and knowledge developed in marriage and other investments made during a marriage that are worth far more with the marriage than they would be if the marriage was terminated. (Raising Kids or knowing your partner's favorite meals. Parents devote a lot of time with children and provide satisfaction to the parents within the marriage, but not necessarily provide the same satisfaction to a different partner.) ----> Risk Pooling: occurs when married-couple families have the advantage that is one spouse becomes unemployed, they may be able to rely on the earning power of the other partner to cover at least part of their family expenses. (Two income couples benefit more if one person wants to change jobs or go back and get more education because they can rely on other spouse's income.) ----> Institutional Advantages: Can include coverage by a spouse's health insurance, pension rights, and social security benefits. (This is the reason same sex marriages was legalized).

What is the opportunity cost approach to estimating nonmarket production?

----> Economists mainly use opportunity cost approach which sets the value of unpaid work equal to the income the person could have earned in the labor market. How much money are you giving up to do market work? ----> A problem with this is it results in a higher value being placed on the nonmarket production of those whose mkt productivity is higher. ----> Sets the value of unpaid work equal to the income the person could have earned in the labor market.

20 C) Describe the pattern of the LFP rate for women in 1980. Describe how it rises and falls and the age range it reaches a max. What is the LFP rate when it is at its max?

----> age peak around 20-24 ----> max LFP ~ 68% ----> more women working overall ----> 18-54 is almost he same % ----> birth control now exists -----> kids don't stop women as much and fewer women had kids

20 D) Describe the pattern of the LFP rate for women in 2000. Describe how it rises and falls and the age range it reaches a max. What is the LFP rate when it is at its max? Also, this curve is very different than others for which age group of women?

----> age peak around 45-54 ----> max LFP ~ 77% ----> 20 - 55 is almost the same % ----> Still an overall increase from 1980 ----> Work increases through childbearing years

20 B) Describe the pattern of the LFP rate for women in 1960. Describe how it rises and falls and the age range it reaches a max(s). What is the LFP rate when it is at its max?

----> age peaks around 18-19 and 45-54 ----> max LFP ~ 51% ----> more older women working than in 1940 ----> this was still pre-birth controlo ----> women began to re-enter labor force once kids got older

20 G) In figure 5-4, how does the male LFP rate compare between 1948 and 2015?

----> an overall decline for all ages ----> why haven't men been working as much as before?

20) F) In figure 5-4, for all time periods shown, what is the shape of male LFP as a man goes from teens to middle age to elderly?

----> it's an upside down 'U' ----> late 20's to early 40's are the prime years

20. A) Describe the pattern of the LFP rate for women in 1940. Describe how it rises and falls and the age range it reaches a max. What is the LFP rate when it is at its max?

----> max age around 20-24 (sharp decline after peak) ----> max LFP is 45-50% ----> younger women had little change because didn't have kids and weren't married yet ----> women never re-entered the labor force after they left

9) What ages are designated as the "prime working ages"?

25 - 54

9) What does the research show about the gender difference in hours and pay for household work for teenage boys and girls? Data from the early 2000s show that in the US, teenage girls spent _____% more time doing housework than teenage boys. Was the pattern true in a country like Denmark with even more gender equality ______

50%; YES

21 ) In 1970, _____% of women worked at some time during the year and only _____% of women were employed full-time and year round. By 2014, ____% of women worked at some time during the year and _____% of them were employed full-time and year round. So from this data, we can conclude that there hasn't been much of a change in women who worked at some time during the year, but what about the change in the percentage of those who worked full-time and year round?

53% 41% 58% 61% ----> it increased by 20%

12) From table 4-2 and the discussion in the text of it, employed wives with at least one preschool age child spent nearly ________% as much time directly engaged with their child as unemployed counterpartners.

75%

18) In the 1890 United States Census, the LFP rate for men was _____% but only _____% of all women were in the paid labor force.

84%; 18%

33) As late as the turn of the 20th century (1900) _____% of all clreical workers were men. Give two reasons why clerical work became a femal dominated occupation.

85% 1. general paperwork help was needed 2. women could be easily trained to do basic office work

24) How does the government's definition of "family" lead to more kids being counted as living in single parent households when they are in fact living with both parents?

A household consisting of an unmarried couple and their own children may be counted as a single parent family. But since cohabitation has increased, government statistics have become misleading whether the kids live with one or both parents. (cohabitating is not considered family unit under gov statistics)

3) The labor force includes who?

All individuals 16 yrs of age and over who worked for pay or profit during the reference week or actively sought paid employment during the 4 weeks prior to the reference week.

10) What are the differences in housework for men in married vs. cohabiting couples? They both spend less time than do women, but do married men or cohabiting men spend more time on housework? ___________________________________________________________. It makes sense because when you are married, you have more bargaining power to specialize. (Specialization and exchange model holds up less for cohabitating cause easier to break the relationship)

Cohabitating spend more time on housework. [It makes sense because when you are married, you have more bargaining power to specialize. Specialization and exchange model holds up less for cohabitating cause easier to break the relationship]

Bargaining approach to marriage: be able to apply and explain divorce-threat model. How does one spouse gain more bargaining power within the marriage?

Decisions on how to allocate income and time to family. Easy if wife and husband have the same preference but this is not always the case. But whose preference will receive more weight? Had to do with bargaining power...in history, these men were the breadwinners and had more bargaining power. The wife's economic dependence had to do with her bargaining power... if the marriage was to end and she had no resources, this weakened her bargaining power. But as women's income increases so does their decisions on how to allocate resources (increase in bargaining power). Bargaining power of each spouse is determined by his or her "threat point"- the level that each would attain if the couple cannot reach an agreement within the marriage. In the most common type of family bargaining model, termined divorce- threat bargaining model. As one's income or interdependence increases, their bargaining power increases.

6) Is being 'in the labor force" mean the same thing as ''working"?

No, "working" around the house is not considered being "in the labor force"

4) Is any person who is not working officially designated as unemployed? What is the definition of an unemployed person?

No. If they are neither employed or unemployed, then they are out of the labor force. The unemployment includes those who do not have a job but who have made specific efforts to find a job within the last 4 weeks as well as those not working but wanting to be called back to work or to report for a new job within 30 days.

How is the opportunity cost calculated for market and home goods?

Opp Cost of Mkt goods= home goods $/ Mrkt good $ Opp Cost of Home goods= Mrkt goods $/ home goods $.

20 H) Now compare figures 5-3 and 5-4. Does the female LFP rate become more like or less like the male LFP rate overtime (years, not age categories)? That is, does the general shape of the graph in 2015 look the same or different for men versus women?

Overtime, the women's graph increases and begins to have the same upside down 'U' shape as the males graph. Male's graph decreases overtime but still maintains the upside down 'U' shape.

22) What has been the most fundamental shift in the family in recent years? Give some data to support this conclusion.

The most fundamental shift in the family in recent years relates to what has been termed as "retreat" from marriage. Marriage rates have fallen from 10.6 marriages per 1000 population in 1970 to 6.9 in 2014. Increasing rates of cohabitation before marriage increases. (Longer time waiting to get married now if get married at all)

After calculatingthe opportunity costs for market and home goods, what determines who has the comparative advantage and who does what?

Whichever one has the LOWEST OPP cost... they have the competitive advantage in that area. For each $1 of HOME goods produced, you forgo the OPP cost of HOME GOOD category.

What is household?

consists of one or more persons living in one dwelling unit and sharing living expenses

What is family?

consiting of two or more persons, related by blood marraige or adoption living in the same household

What is th transactional cost?

cost of making an economic trade, such as time spent researching or negotiating

What is positive economics?

description and explanation of economic phenomena; facts and cause-and-effect of economc theories

What is gender?

encompasses the distinctions SOCIETY has erected on this biological base; used to describe the distinction roles and behaviors as well as mental and emotional characteristics

What is normative economics?

fairness or what the outcome of the economy or goals of public policy OUGHT to be, opinion based

How is comparative advantage determined?

measure the opportunity cost of producing each good for each person

24 ) In figure 5-5 (page 103), the unemployment rates for women and men are charted. Prior to the 1980's, do men or women have lower unemployment rates? _____. After 1980, they have about the same unemployment rate but the unemployment rate is HIGHER during recessions for men or women? ______.

men men

What is sex?

the biological differences between males and females

5) What is the definition of labor force participation rate?

those in the labor force -------------------------- population