All Flashcards
What does an upward-sloping labor supply curve indicate?
Higher wages lead to more people willing to work.
What does a downward-sloping labor demand curve indicate?
Higher wages lead to firms hiring less labor.
On a labor market graph, what does the equilibrium point represent?
The market wage rate and the quantity of labor employed where labor supply equals labor demand.
On a labor market graph, what does a point above the equilibrium represent?
A surplus of labor, where the quantity of labor supplied is greater than the quantity of labor demanded.
On a labor market graph, what does a point below the equilibrium represent?
A shortage of labor, where the quantity of labor demanded is greater than the quantity of labor supplied.
What does a rightward shift of the labor demand curve indicate?
An increase in labor demand, meaning firms are willing to hire more workers at any given wage.
What does a leftward shift of the labor demand curve indicate?
A decrease in labor demand, meaning firms are willing to hire fewer workers at any given wage.
What does a rightward shift of the labor supply curve indicate?
An increase in labor supply, meaning more workers are willing to work at any given wage.
What does a leftward shift of the labor supply curve indicate?
A decrease in labor supply, meaning fewer workers are willing to work at any given wage.
How does a minimum wage above the equilibrium wage appear on a labor market graph?
As a horizontal line above the equilibrium point, creating a surplus of labor (unemployment).
How does increased productivity affect labor demand?
Increased productivity makes workers more valuable, increasing labor demand.
How does increased product demand affect labor demand?
Increased product demand requires more resources, including labor, increasing labor demand.
How does immigration affect labor supply?
More immigration increases the number of workers, shifting the labor supply curve to the right.
How does stricter licensing affect labor supply?
Stricter licensing reduces the number of people entering a field, shifting the labor supply curve to the left.
How does a minimum wage above equilibrium affect the labor market?
It creates a surplus of labor (unemployment) because more people want to work at that wage than firms are willing to hire.
How does a decrease in the price of a substitute resource affect the demand for the original resource?
It decreases the demand for the original resource as firms switch to the cheaper substitute.
How does increased value of leisure time affect labor supply?
It decreases labor supply, shifting the curve to the left, as people choose to work less.
How do changes in societal roles, like more women entering the workforce, affect labor supply?
It increases labor supply, shifting the curve to the right, as more people are available and willing to work.
How does a decrease in product price affect labor demand?
It decreases the value of the labor that produces it, lowering labor demand (MRP = MP x Price).
If the price of aluminum increases, how will this affect the demand for its complement, sugar?
The demand for sugar will decrease, as aluminum and sugar are used together, and using less aluminum will require less sugar.
Define factor supply.
The amount of labor workers are willing and able to offer at different wage rates.
Define factor demand.
The amount of labor firms are willing and able to hire at different wage rates.
Define labor supply.
The amount of labor workers are willing and able to offer at different wage rates.
Define labor demand.
The amount of labor firms are willing and able to hire at different wage rates.
What is a surplus of labor?
When the wage is too high, more people want to work than firms want to hire, potentially due to a wage floor.
What is a shortage of labor?
When the wage is too low, firms want to hire more people than are willing to work, potentially due to a wage ceiling.
Define substitute resources.
Resources that firms can use in place of each other.
Define complementary resources.
Resources that are used together in the production process.
What is the wealth effect?
The phenomenon where increased wealth may cause people to work less.
Define Factor Market Equilibrium.
The point where labor supply meets labor demand, determining the market wage rate and quantity of labor employed.