All Flashcards
What is the impact of a minimum wage law on employment?
If set above the equilibrium wage, it can lead to a decrease in employment (unemployment).
How does a payroll tax affect the labor market?
It increases the cost of hiring workers, potentially decreasing labor demand and wages.
What is the impact of occupational licensing on the supply of labor?
It restricts the supply of labor in that occupation, potentially increasing wages for those licensed.
How do government subsidies for education affect the labor market?
They can increase the supply of skilled labor, potentially decreasing wages for those skills in the long run.
Analyze a downward-sloping labor demand curve.
As wages decrease, the quantity of labor demanded by firms increases, and vice versa.
Analyze an upward-sloping labor supply curve.
As wages increase, the quantity of labor supplied by individuals increases, and vice versa.
What does the intersection of the labor demand and supply curves represent?
The equilibrium wage rate and the equilibrium quantity of labor in the market.
How does a shift in the labor demand curve affect the equilibrium wage?
A rightward shift increases the equilibrium wage; a leftward shift decreases it.
How does a shift in the labor supply curve affect the equilibrium wage?
A rightward shift decreases the equilibrium wage; a leftward shift increases it.
Analyze the graph of Marginal Product (MP) and Total Product (TP).
MP eventually diminishes and becomes negative, causing TP to increase at a decreasing rate and then decrease.
What is the difference between diminishing returns and negative returns?
Diminishing returns: Output increases at a decreasing rate. Negative returns: Total output decreases.
What is the difference between Marginal Product (MP) and Marginal Revenue Product (MRP)?
MP is the additional output from one more worker. MRP is the additional revenue from that worker (MP * Price).
Compare the product market and the factor market.
In the product market, households demand goods/services and firms supply them. In the factor market, firms demand resources (factors of production) and households supply them.