AP经济学复习整理（5）

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　　Chapter 13 Resource Markets with Application to Labor

　　●Connections between Product Markets and Resources Markets

　　Importance: the elasticity of the two kinds is correlated; income distribution depends on contribution.

　　MRP(Marginal Revenue Product)=MPP(Marginal Physical Product)*P( or MR). The firm wants to pay labor no more than its contribution at the margin of adding one more unit of labor

　　MRP= Demand for Labor

　　MFC: Marginal Factor Cost; each additional unit of labor hired by the firm; MFC=Price of labor.

　　●Derived Demand: Wage Elasticity of Demand

　　Derived Demand: the demand for a resource is derived from the demand for the product produced.

　　Wage of elasticity of demand(WED): (%△Quantity Demanded of Labor)/(%△Wage Rate) – the extent of the change in wage will influence the change in labor demanded.

　　Three laws of derived demand:

　　1. The higher the price elasticity of demand for the product, the higher the wage elasticity of demand.

　　2. The higher the proportion of labor costs relative to total sots of production, the higher will be the WED (the labor is more important in the production).

　　3. The greater the number of substitute resources available and the degree to which they are substitutable, the higher will be the wage elasticity of demand.

　　●The Demand for a Resource (Labor)

　　Wage rate is not only based on the contributions the labor makes but also on the value the product sells in the market.

　　The Demand curve is downward sloping to the right, which demonstrates the inverse relationship between the wage rate and the quantity of labor demanded by the firm.

　　Demand=MRP

　　The firm that wants to maximize its profits in the hire of labor will continue to hire labor as long as the marginal revenue product(MRP) is greater than the marginal factor cost MFC (MRP > MFC) up to the level of hiring at which the MRP=MFC.

　　●Perfectly Competitive Labor Market

　　In perfectly competitive labor market, the wage rate is determined by the market.

　　The firm must pay its hired workers the market-determined wage.

　　The firm will continue to hire workers as long as the MRP for each additional unit is greater than the associated MFC. If there is no level of hiring at MRP=MFC, then choose the highest level of labor units at which MRP>MFC.

　　●Imperfectly Competitive Labor(Resource) Market

　　Each time the firm wants to hire an additional unit of labor and is forced to put a higher wage-rate to attract labor, MFC>AC or wage rate.

　　Monopsony: the market with only one buyer.

　　Unit of labor is the intersection of MRP=MFC. But the wage rate is the corresponding point at the Wage Rate Line.

　　Monosponist pays a lower wage than the competitive labor market.

　　●Cost Minimization and Profit Maximization in the Hire of More Than One Resource

　　1. Cost minimization:

　　MPP(labor)/MFC(labor)=MPP(capital)/MFC(capital) also maximum (if in the perfect competitive market, MFC=P)

　　No other combination of inputs of labor and capital will produce any improvement in resource efficiency.

　　2. Profit Maximization

　　MRP(labor)/MFC(labor)=MRP(capital)/MFC(capital)=1 (to maximize profits)

　　●Shifts in Demand for a Resource (labor)

　　Any condition that causes MPP or P to increase will cause an increase in demand for labor or a shift to the right in the demand curve. Conversely, also true.

　　The number of employers of the resource will also shift the demand for labor.

　　The prices and availability of substitutes for labor will be a factor.

　　●Supply of Resources

　　The normal labor curve is upward sloping. The higher the wage rate, the higher the amount of labor supplied representing the minimum wage that will be acceptable for each additional amount of labor.

　　The special labor curve is characterized as backward bending. At first, as the wage rate increases, the quantity increases. Then, as the wage rates increases, the quantity of labor decreases.

　　●Labor-leisure Tradeoff

　　The normal curve of labor supply might better apply to some labor force participants. Whether to provide labor at the cost of leisure – which causes the backward bending labor supply curve. Some people are just unwilling to provide more labor at the cost of leisure time.

　　●Substitution Effect

　　The normal labor supply curve is applicable to low-income, discriminated workers who can’t afford leisure.

　　The backward bending curve would most likely apply to workers who are older, more experienced and who have amassed some wealth – they can afford leisure.

　　●Transfer Earnings and Rents

　　We must pay the supplier his costs in order to expect the supplier to continue the supply of goods or services or to expect continuing or new competition for price discipline.

　　The transfer earnings are the costs including the value of what could be earned elsewhere with the same resources.

　　Rents means paying more than the same resources can earn elsewhere.

　　●Shifts in Supply - factors

　　1. Attractiveness of an occupation.

　　2. The number of suppliers.

　　3. The relative prices of competing uses of a resource (e.g. labor – taking up different jobs)

　　●Bases of Wage Differentials

　　1. Not all jobs are equally attractive

　　2. Innate differences.

　　3. Human capital.

　　4. Compensating wage difference (e.g. risk compensation)

　　5. Psychic income (satisfaction and honor of certain job)

　　6. Discrimination

　　7. Immobility- we don’t all move to the best jobs

　　8. Labor market imperfections

　　9. Government interference

　　●Income Inequality

　　Points on the Lorenz Curve for any given population represent unequal shares of income per the deciles of the population. The greater the difference between the line of proportionality and the Lorenz Curve, the greater the degree of income inequality.

　　The points on the curve is cumulative.

　　Gini coefficient: Gini coefficient is the ratio of the area surrounded by the blue and red lines over the whole triangle depicted in the graph above. Gini coefficient ranges from 0 to 1. The larger the coefficient, the more unequal the income is.