要素投入品市場

1、chapter 14markets for factor inputstopics to be discussedncompetitive factor marketsnequilibrium in a competitive factor marketnfactor markets with monopsony powernfactor markets with monopoly powercompetitive factor marketsncharacteristics1) large number of sellers of the factor of production2) lar

2、ge number of buyers of the factor of production3) the buyers and sellers of the factor of production are price takerscompetitive factor marketsndemand for a factor input when only one input is variableldemand for factor inputs is a derived demanduderived from factor cost and output demandcompetitive

3、 factor marketsassumeutwo inputs: capital (k) and labor (l)ucost of k is r and the cost of labor is wuk is fixed and l is variabledemand for a factor input whenonly one input is variablecompetitive factor marketslproblemuhow much labor to hiredemand for a factor input whenonly one input is variablec

4、ompetitive factor marketsnmeasuring the value of a workers outputlmarginal revenue product of labor (mrpl)lmrpl = (mpl)(mr)demand for a factor input whenonly one input is variablecompetitive factor marketsnassume perfect competition in the product marketlthen mr = pdemand for a factor input whenonly

5、 one input is variablecompetitive factor marketsnquestionlwhat will happen to the value of mrpl when more workers are hired?demand for a factor input whenonly one input is variablemarginal revenue producthours of workwages($ perhour)mrpl = mplx pcompetitive output market (p = mr)mrpl = mpl x mrmonop

6、olistic output market(p w (the marginal cost of hiring a worker): hire the workerlif mrpl w: hire less laborlif mrpl = w: profit maximizing amount of labordemand for a factor input whenonly one input is variablew*slin a competitive labor market, a firm faces a perfectly elastic supply of laborand ca

7、n hire as many workers as it wants at w*.hiring by a firm in thelabor market (with capital fixed)quantity of laborprice oflaborwhy not hire fewer or more workers than l*.mrpl = dll*the profit maximizing firm willhire l* units of labor at the point where the marginal revenue productof labor is equal

8、to the wage rate.competitive factor marketsnif the market supply of labor increased relative to demand (baby boomers or female entry), a surplus of labor would exist and the wage rate would fall.nquestionlhow would this impact the quantity demanded for labor?demand for a factor input whenonly one in

9、put is variablea shift in the supply of laborquantity of laborprice oflaborw1s1mrpl = dll1w2l2s2competitive factor marketsncomparing input and output marketsproduction of mc mpmp mrmr)(mpmrp workersofnumber maximizingprofit at and mr)(mp(mrpllllllwwwwcompetitive factor marketsncomparing input and ou

10、tput marketslin both markets, input and output choices occur where mr = mcumr from the sale of the outputumc from the purchase of the inputcompetitive factor marketsnscenariolproducing farm equipment with two variable inputs:ulaboruassembly-line machinerylassume the wage rate fallsdemand for a facto

11、r input whenseveral inputs are variablecompetitive factor marketsnquestionlhow will the decrease in the wage rate impact the demand for labor?demand for a factor input whenseveral inputs are variablemrpl1mrpl2when two or more inputs arevariable, a firms demand for one inputdepends on the marginal re

12、venue product of both inputs.firms demand curve for labor(with variable capital)hours of workwages($ perhour)051015204080120160when the wage rate is $20, a represents one point on the firmsdemand for labor curve.when the wage rate falls to $15, themrp curve shifts, generating a newpoint c on the fir

13、ms demand forlabor curve. thus a and c areon the demand for labor curve, butb is not.dlabcnassume that all firms respond to a lower wagelall firms would hire more workers.lmarket supply would increase.lthe market price will fall. lthe quantity demanded for labor by the firm will be smaller.competiti

14、ve factor marketsindustry demand for labormrpl1the industry demand for laborlabor(worker-hours)labor(worker-hours)wage($ perhour)wage($ perhour)05101505101550100150l0l2dl1horizontal sum ifproduct priceunchanged120mrpl2l1industrydemandcurvedl2firmindustrythe industry demand for labornquestionlhow wou

15、ld a change to a non-competitive market impact the derivation of the market demand for labor?the demand for jet fuelnobservationsljet fuel is a factor (input) costlcost of jet fuelu1971-jet fuel cost equaled 12.4% of total operating costu1980-jet fuel cost equaled 30.0% of total operating costu1990s

16、-jet fuel cost equaled 15.0% of total operating costthe demand for jet fuelnobservationslairlines responded to higher prices in the 1970s by reducing the quantity of jet fuel usedlton-miles increased by 29.6% & jet fuel consumed rose by 8.8%the demand for jet fuelnobservationslthe demand for jet

17、 fuel impacts the airlines and refineries alikelthe short-run price elasticity of demand for jet-fuel is very inelasticshort-run price elasticityof demand for jet fuelamerican-.06delta-.15continental-.09twa-.10northwest-.07united-.10airlineelasticityairlineelasticitythe demand for jet fuelnquestionl

18、how would the long-run price elasticity of demand compare to the short-run?the short- and long-rundemand for jet fuelquantity of jet fuelpricemrplrmrpsrcompetitive factor marketsnthe supply of inputs to a firmldetermining how much of an input to purchaseuassume a perfectly competitive factor markets

19、market supplyof fabrica firms input supply in acompetitive factor marketyards offabric (thousands)yards offabric (thousands)price($ peryard)price($ peryard)dmarket demandfor fabric100me = ae1010supply offabric facing firm50demand for fabricmrpobservations1) the firm is a price taker at $10.2) s = ae

20、 = me = $103) me = mrp 50 unitscompetitive factor marketsnthe market supply of inputslthe market supply for physical inputs is upward slopinguexamples: jet fuel, fabric, steellthe market supply for labor may be upward sloping and backward bendingcompetitive factor marketsnthe supply of laborlthe cho

21、ice to supply labor is based on utility maximizationlleisure competes with labor for utilitylwage rate measures the price of leisurelhigher wage rate causes the price of leisure to increasecompetitive factor marketsnthe supply of laborlhigher wages encourage workers to substitute work for leisure (i

22、.e. the substitution effect)lhigher wages allow the worker to purchase more goods, including leisure which reduces work hours (i.e. the income effect)competitive factor marketsnthe supply of laborlif the income effect exceeds the substitution effect the supply curve is backward bendingincome effect

23、substitution effectbackward-bending supply of laborhours of work per daywage($ perhour)supply of labor12cworker chooses point a:16 hours leisure, 8 hour workincome = $8016qpaw = $10substitution and incomeeffects of a wage increasehours of leisureincome($ perday)024082448020bw = $20suppose wages incr

24、ease to $20 substitution effectincome effectincrease wage to $20 worker chooses: 20 hour leisure, 4 hours work income = $80labor supply for one- andtwo-earner householdsnfemale percent of labor forcel1950 - 29%l1999 - 60%elasticities of labor supply (hours worked)heads hoursspouses hoursheads hoursw

25、ith respect towith respect towith respect togroupheads wagespouses wagespouses wageunmarried males.026(no children)unmarried females.106(with children)unmarried females.011(no children)one-earner family-.078(with children)one-earner family.007(no children)two-earner family-.002-.086-.004(with childr

26、en)two-earner family-.107-.028-.059(no children)equilibrium in acompetitive factor marketna competitive factor market is in equilibrium when the price of the input equates the quantity demanded to the quantity supplied.sl = aesl = aedl = mrpldl = mrplp * mpllabor market equilibriumnumber of workersn

27、umber of workerswagewagecompetitive output marketmonopolistic output marketwclcwmlmvmablabor market equilibriumnequilibrium in a competitive output marketldl(mrpl) = sllwc = mrpllmrpl = (p)(mpl)lmarkets are efficientnequilibrium in a monopolistic output marketlmr plmrp = (mr)(mpl)lhire lm at wage wm

28、lvm = marginal benefit to consumerslwm = marginal cost to the firmlabor market equilibriumnequilibrium in a competitive output marketldl(mrpl) = sllwc = mrpllmrpl = (p)(mpl)lmarkets are efficientnequilibrium in a monopolistic output marketlprofits maximizedlusing less than the efficient level of inp

29、utneconomic rentlfor a factor market, economic rent is the difference between the payments made to a factor of production and the minimum amount that must be spent to obtain the use of that factor.equilibrium in acompetitive factor markettotal expenditure (wage) paidis 0w* x al*economic renteconomic

30、 rent is abw*beconomic rentnumber of workerswagesl = aedl = mrplw*l*a0the economic rent associated with theemployment of labor is the excess of wages paid above the minimum amount neededto hire workers.economic rentnquestionlwhat would be the economic rent if sl is perfectly elastic or perfectly ine

31、lastic?nland: a perfectly inelastic supplylwith land inelastically supplied, its price is determined entirely by demand, at least in the short run.equilibrium in acompetitive factor marketeconomicrents1economicrents2land rentnumber of acresprice($ peracre)supply of landd2d1pay in the militarynduring

32、 the civil war 90% of the armed forces were unskilled workers involved in ground combat.ntoday, only 16% are unskilled workers involved in ground combat.pay in the militarynshortages of skilled personnel has occurred? why?lhint: if there is a shortage, the wage must be below the?the shortage ofskill

33、ed military personnelnumber of skilled workerswagesldl = mrplw*w0shortagepay in the militarynmilitary pay is based on years of service not mrp.nmrp increases and the private sector pay is greater than military pay.nmany leave the military.pay in the militarynsolutionlselective reenlistment bonuseslb

34、ase pay on mrpfactor markets with monopsony powernassumelthe output market is perfectly competitive.linput market is pure monopsony.sl = average expenditure (ae)marginalexpenditure (me)why is marginal expendituregreater than sl?d = mrplmarginal and average expenditureunits of inputprice(per unitof i

35、nput)01234655101520w* = 13l*wclccfactor markets with monopsony powernexamples of monopsony powerlgovernmentusoldiersumissilesub2 bomberslnasauastronautslcompany townmonopsony power inthe market for baseball playersnbaseball owners created a monopsonistic cartellreserve clause prevented competition f

36、or playersl1975-free agency after six yearsl1969-average salary was $42,000 ($200,000 in 1999 dollars)l1997-average salary was $1,383,578nbaseball owners created a monopolistic cartell1975 salaries were 25% of team expendituresl1980 salaries were 40% of team expendituresmonopsony power inthe market

37、for baseball playersteenage labor marketsand the minimum wagenwhen the minimum wage rose in new jersey in 1992 from $4.25 to $5.05, a survey conducted found a 13% increase in employment.nexplanationslreduction in fringe benefitsllower pay for more productive workerslmonopsony marketteenage labor mar

38、ketsand the minimum wagenfindingslnone of the explanations are validated by the survey resultslindicates of the need for further studyteenage labor marketsand the minimum wagefactor markets with monopoly powernjust as buyers of inputs can have monopsony power, sellers of inputs can have monopoly pow

39、er.nthe most important example of monopoly power in factor markets involves labor unions.sldlmrwhen a labor union is a monopolist, it chooses among points on the buyersdemand for labor curve.monopoly power of sellers of labornumber of workerswageperworkeral*w*the seller can maximize the number of wo

40、rkershired, at l*, by agreeing that workers will work at wage w*.economicrentw1l1the quantity of labor l1 that maximizesthe rent that employees earn is determinedby the intersection of the marginal revenueand supply or labor curves; union membersreceive a wage rate of w1.sldlmrmonopoly power of sell

41、ers of labornumber of workerswageperworkeral2w2finally, if the union wishes to maximize totalwages paid to workers, it should allow l2union members to be employed at a wagerate of w2 because the marginal revenueto the union will then be zero.l*w*nthe primary determinant of controlling wage and econo

42、mic rent is controlling the supply of laborfactor markets with monopoly powerna two-sector model of labor employmentlunion monopoly power impacts the nonunionized part of the economy.factor markets with monopoly powerwage determination inunionized and nonunionized sectorsnumber of workerswageperwork

43、erdudnudlslw*ulwuwhen a monopolistic unionraises the wage rate in theunionized sector of theeconomy from w* to wu, employment in that sector falls.for the total supply of labor toremain unchanged, the wage in the nonunionized sectormust fall from w* to wnu.mulwnunbilateral monopolylmarket in which a

44、 monopolist sells to a monopsonist.factor markets with monopoly powerbilateral monopolynumberof workerswageperworkerdl = mrplmr510152025102040sl = aeme2519wagepossibilitieswcbilateral monopolynumberof workerswageperworkerdl = mrplmr510152025102040sl = (ae)me2519wcnobservationslhiring without union m

45、onopoly powerumrp = me at 20 workers and w = $10/hrlunions objectiveumr = mc at 25 workers and w = $19/hrbilateral monopolynwho will win?lthe union will if its threat to strike is credible.lthe firm will if its threat to hire non-union workers is credible.lif both make credible threats the wage will

46、 be at wc.the decline of private sector unionismnobservationslunion membership and monopoly power has been declining.linitially, during the 1970s, union wages relative to nonunion wages fell.nobservationslin the 1980s union wages stabilized relative to non-union wages.lin the 1990s membership has be

47、en falling and wage differential has remained stable.the decline of private sector unionismnexplanationlthe unions have been attempting to maximize the individual wage rate instead of total wages paid.lthe demand for unionized employees has probably become increasingly elastic as firms find it easie

48、r to substitute capital for skilled labor.the decline of private sector unionismwage inequality-havecomputers changed the labor market?n1950 - 1980lrelative wage of college graduates to high-school graduates hardly changedn1980-1995lthe relative wage grew rapidlywage inequality-havecomputers changed

49、 the labor market?nin 1984, 25.1% of all workers used computersn1993 - 46.6%n1999 - nearly 60%wage inequality-havecomputers changed the labor market?npercent change in use of computers lcollege degreesu1984 - 1993 - 42 to 70%lless than high school degreeu5 to 10%lwith high school degreeu19 to 35%wage inequality-havecomputers changed the labor market?ngrowth in wages - 1983 - 1994lcollege graduates using computers - 11%lnon-computer users - less than 4%wage inequality