The Economics of Labor markets Chapter 18 Copyright C 2001 by Harcourt, Inc All rights reserved. Requests for permission to make copies of any part of t work should be mailed to Permissions Department, Harcourt College Publishers 6277 Sea Harbor Drive. Orlando Florida 32887-6777
The Economics of Labor Markets Chapter 18 Copyright © 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt College Publishers, 6277 Sea Harbor Drive, Orlando, Florida 32887-6777
Factors of Production Factors of production are the inputs used to produce goods and services H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Factors of Production Factors of production are the inputs used to produce goods and services
The market for the factors of Production The demand for a factor of production is a derived demand. eA firm's demand for a factor of production is derived from its decision to supply a good in another market H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Market for the Factors of Production The demand for a factor of production is a derived demand. uA firm’s demand for a factor of production is derived from its decision to supply a good in another market
The demand for labor Labor markets. like other markets in the economy, are governed by the forces of supply and demand. Harcourt, Inc. items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Demand for Labor Labor markets, like other markets in the economy, are governed by the forces of supply and demand
The Versatility of Supply and Demand (a The Market for Apples (b The Market for Apple Pickers Wage of Price of Apple Apples Supply Pickers Supply Demand Demand Quantity 0 Quantity of of Apples Apple Pickers Harcourt, Inc. items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Versatility of Supply and Demand... (a) The Market for Apples (b) The Market for Apple Pickers Quantity of Apples Quantity of Apple Pickers Q L P W 0 0 Price of Apples Wage of Apple Pickers Demand Demand Supply Supply
The demand for labor Most labor services. rather than being final goods ready to be enjoyed by consumers. are inputs into the production of other goods. H arc Inc. items and derived items c ht o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Demand For Labor Most labor services, rather than being final goods ready to be enjoyed by consumers, are inputs into the production of other goods
The production function and The Marginal Product of Labor The production function illustrates the relationship between the quantity of inputs used and the quantity of output of a good H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Production Function and The Marginal Product of Labor The production function illustrates the relationship between the quantity of inputs used and the quantity of output of a good
How the Competitive Firm Decides How Much Labor to hire Marginal value of the Product Marginal of labor Product Marginal profit Labor Output_MPL of labor MPL=△Q△VMPL= PxMPL Wage AI Profit= VmPL-w L01234 Q0 100 100 $1,000 500 500 180 80 s800 500 300 240 60 s600 $500 $100 280 40 400 500 $100 300 20 $200 500 300 Harcourt, Inc. items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. How the Competitive Firm Decides How Much Labor to Hire Labor L Output Q Marginal Product of Labor MPL Value of the Marginal Product of Labor VMPL=PxMPL Wage W Marginal Profit 0 0 1 100 100 $1,000 $500 $500 2 180 80 $800 $500 $300 3 240 60 $600 $500 $100 4 280 40 $400 $500 -$100 5 300 20 $200 $500 -$300 MPL Q/ L Pr ofit VMPL W
The production Function 350 3001“5 250 200 150 100 ■■■■■■■ ■■■■■■■ 0 Quantity of Apple Pickers H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Production Function... 0 0 50 100 150 200 250 300 350 0 1 2 3 4 5 6 Quantity of Apple Pickers Q u a n tit y o f A p ple s 1 2 3 4 5
The production function and the Marginal Product of Labor The marginal product of labor is the increase in the amount of output from an additional unit of labor MPL=△Q/△L MPL=(Q2-01)/(L2-L1) H arc Inc items and derived items copyright C 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Production Function and The Marginal Product of Labor The marginal product of labor is the increase in the amount of output from an additional unit of labor. MPL = Q/L MPL = (Q2 – Q1)/(L2 – L1)
