Microeconomics · free preview
Labor Supply and the Market Wage
Workers trade leisure for income, higher wages make both time and consumption cheaper relative to each other, and the market wage settles where supply meets the marginal revenue product demand.
1. The worker's choice
The worker's choice
2. Equilibrium
Equilibrium
3. Who gets paid what
Who gets paid what
4. The supply side's policy shadow
The supply side's policy shadow
5. The two effects
A worker's wage rises. What are the substitution and income effects on her hours of leisure?
6. Reading a wage shift
A new technology doubles bakery productivity. What happens in the town's labor market?
7. The cleared market
At a wage of 30 dollars a day, bakeries in total want to hire 40 bakers and 40 bakers offer their hours. Suppose demand shifts so that at every wage firms want 10 more bakers, and the new equilibrium wage is 36 dollars, at which 44 bakers are offered and wanted. Compute the increase in equilibrium employment, and write the number.
8. The wage's two arrows
When a worker's wage rises, what do the substitution and income effects do to her leisure?
9. The technology tide
A new technology doubles bakery productivity in a town. What happens in its labor market?
10. The shortage at 25
At a wage of 25 dollars a day, bakeries in total want to hire 50 bakers and 35 bakers offer themselves. Compute the market shortage, and write the number.
Practice this interactively
Free account · instant grading · spaced review that schedules itself.
Start this course for free