micro 2 - chapter 6
DESCRIPTION
Microeconomics 1TRANSCRIPT
7/21/2019 Micro 2 - Chapter 6
http://slidepdf.com/reader/full/micro-2-chapter-6 1/7
1
CHAPTER 6
LABOUR MARKET
CONTENT
Labour supply
Labour demand
Equilibrium in labour market
7/21/2019 Micro 2 - Chapter 6
http://slidepdf.com/reader/full/micro-2-chapter-6 2/7
2
I. LABOUR SUPPLY
1. Definition
- The number of working hours that worker is willing to workand able to work at various wage levels in a certain time,ceteris paribus
- Diagram:
w
l, t
SL
I. LABOUR SUPPLY
2. Determinants in labour supply function
- Wages
- Economic pressure
- Social pressure
- Time restrain/limitation
7/21/2019 Micro 2 - Chapter 6
http://slidepdf.com/reader/full/micro-2-chapter-6 3/7
3
I. LABOUR SUPPLY
MU restMU working
t*24-t*
II. LABOUR DEMAND
1. Definition
- The number of working hours that employer is willing to hire
and afford to hire at various wage levels in a certain time,ceteris paribus
Derived demand
Diagram:
W
t,l
DL
7/21/2019 Micro 2 - Chapter 6
http://slidepdf.com/reader/full/micro-2-chapter-6 4/7
4
II. LABOUR DEMAND
2. Determinants in labour demand function
- Wages
- Quality of employee
- Demand of goods and services
II. LABOUR DEMAND
3. Marginal revenue product of labour (MRPL)
- The change in total revenue results from the change innumber of employee
- → MRPL is a downward sloping curve
L L MPP MR L
Q
Q
TR MRP .. =
∆
∆
∆
∆=
7/21/2019 Micro 2 - Chapter 6
http://slidepdf.com/reader/full/micro-2-chapter-6 5/7
5
II. LABOUR DEMAND
4. Optimal employment
MRPL > w: Expandingemployment
MRPL < w: Restrainingemployment
MRPL = w: Optimalemployment
→ MRPL is the labour demandcurve
w
t,l
MRPL
w*w
III. EQUILIBRIUM IN LABOUR MARKET
1. Equilibrium in a perfect competition marketw
t,l
w
t,l
w*
MRPLDL
SL
w*
7/21/2019 Micro 2 - Chapter 6
http://slidepdf.com/reader/full/micro-2-chapter-6 6/7
6
III. EQUILIBRIUM IN LABOUR MARKET
2. Equilibrium in monopsony market - A market, where there is
only one buyer/ employer
- Some definitions:
+ Total Inputs Cost (TICL): Total
cost paid for labour
TICL = w.L
+ Marginal Inputs Cost (MICL):The change in total cost resultsfrom the change in number of
hired labour
=∆
∆=
L
TIC MIC L
L
w
t,l
DL=MRPL
SL
MICL
l*1
w*1
III. EQUILIBRIUM IN LABOUR MARKET
2. Equilibrium in monopoly market
- A market where there isonly one supplier/employee
MRL
DL=MRPL
MC
l*2
W*2
7/21/2019 Micro 2 - Chapter 6
http://slidepdf.com/reader/full/micro-2-chapter-6 7/7
7
III. EQUILIBRIUM IN LABOUR MARKET
4. Duopoly - A market where there
are only one supplier
and one buyer
MRLDL=MRPL
SL=MC
MICL
l*1l*2
W*1
W*2
w*3