labor economics
If U represents the number of unemployed persons, E the number of employed persons, and N the number in the potential labor force that are neither unemployed nor employed, the labor force participation rate can be found as
(U + E)/(U + E + N)
Why are indifference curves (a) downward-sloping and (b) convex to the origin? Draw several indifference curves and a single budget line and illustrate a worker's optimal position
- Negative slope -To keep the level of utility the same, if one gets more leisure, some of income must be given up. - Convex to origin -With low hours of leisure, individuals are willing to give up a large amount of income to get 1 more leisure hour.
What information is provided in (a) an indifference curve and (b) the budget line in the work-leisure model?
- The indifference curve shows work and leisure combinations that yield the same amount of total utility. - The budget constraint shows the combinations of income and leisure that a worker could get given a wage rate.
Given the following data, what is the labor force participation rate? Population 100 million Non-institutionalized population, age 16 and over 75 million Persons employed or seeking employment 50 million Unemployed persons 5 million
67%
Given the following data, what is the labor force participation rate? Population 300 million Non-institutionalized population, age 16 and over 250 million Persons employed or seeking employment 200 million Unemployed persons 10 million
80%
Labor economics is studied as a distinct subfield of economics because
A.the bulk of national income is received by labor. B. the concepts of supply and demand must be revised somewhat when applied to labor markets. C. labor economics can be used to analyze major socioeconomic trends such as the surge in the number of women workers
"According to one estimate, in 1984 the average college graduate could expect to make $500,000 more over her or his lifetime than the average high school graduate. From a strictly monetary point of view, this implies that college is a good investment." True or false? Explain.
False. The $500,000 is a not discounted. One must discount the future earnings back to present values before you can make a judgment that a college education is worth the investment.
Explain what is meant by income and substitution effects of a change in the wage rate. In which direction do these effects go? If the income effect is more powerful than the substitution effect, what will the individual's labor supply curve look like? For a wage increase, the IE will tend to reduce desired hours of work while the SE will tend to raise the desired hours of work. If the IE > SE, then the labor supply curve will be backward bending.
On a labor-leisure diagram, illustrate the impact on desired hours of work resulting from an increase in non-wage income. Assume leisure is a normal good.
The three basic characteristics of the economic perspective are:
Relative scarcity, purposeful behavior, and adaptability
On a standard income-leisure diagram, Sara has steeper indifference curves than John. This likely reflects the fact that
Sara values leisure more highly compared to income than John does
On a standard income-leisure diagram, Sara has steeper indifference curves than John. This likely reflects the fact that:
Sara values leisure more highly compared to income than John does
"An increase in the wage rate will cause a person to work fewer hours." True, false, or uncertain. Explain using a labor leisure diagram.
Uncertain. It depends on the strength of the SE and IE. [You should be able to explain what happens to hours of work in this situation depending on the SE and IE.]
The convex shape of a standard indifference curve reflects:
a diminishing marginal rate of substitution of leisure for income
A household will tend to substitute goods for time in the production of commodities if:
a household member's market wage increases
In the context of the basic work-leisure model, "leisure" time includes:
any time not devoted to a paying job
Indifference curves are convex to the origin because
at a lower income, a person is less willing to sacrifice income for additional leisure.
. Most of the variations in U.S. population growth have resulted from changes:
birthrates and net migration
Which of the following best exemplifies the Becker income effect? An increase in the market wage leads a household to:
consume more commodities
The labor force consists of all persons age 16 years and over who are
employed or are actively seeking employment
The labor force consists of all persons age 16 years and over who are:
employed or are actively seeking employment
The declining college wage premium in the 1970s is generally attributed to the
growing supply of college graduates in that period.
Specific training
helps to make labor a quasi-fixed resource.
If a worker's wage rate rises,
household production will shift away from time-intensive commodities toward goods-intensive commodities.
Suppose an individual worker is on the backward-bending portion of her labor supply curve. Then, for a wage increase, the
income effect is stronger than the substitution effect
Compared to a high-wage worker, a low-wage worker will tend to
pursue more time-intensive activities.
Because resources are scarce relative to human wants, economics is best described as
science of choice.
In an income-leisure diagram, the wage rate is graphically represented by the:
slope of the budget line
Let L be leisure and Y be income then the optimal work-leisure position is achieved where:
the MRS L,Y is equal to the wage rate
The concept of demand must be modified when applied to labor markets to reflect the fact that
the demand for labor is derived from the demand for the various products that labor produces.
All else equal, investment in education will be greater,
the greater the earnings differential between more- and less-educated workers.
If this person's wage rate falls as illustrated in the diagram, then
the income effect is stronger than the substitution effect
The substitution effect is
the part of the total change in desired work hours that is due to a change in the wage rate, with real income or utility constant
All else equal, the social rate of return to education will be lower than the private return if
the social return correctly calculates costs by including education subsidies
The higher the individual's wage rate:
the steeper the budget constraint
The higher the individual's wage rate,
the steeper the budget constraint.
In the context of the basic work-leisure model, "work" is defined as:
time devoted to a paying job
As distinct from product market transactions, labor market transactions are unique in that
to the seller, the nonmonetary characteristics of the sale can be as important as the price.
The private rate of return on human capital may _____ the social rate because _____.
understate; schooling provides external benefits
General training
will be paid for by the employee in the form of a reduced wage.
The major bulk of national income flows to:
workers in the form of wages and salaries
