All Flashcards
What are the differences between factor markets and product markets?
Factor markets are for inputs (like labor), while product markets are for outputs (goods and services). In factor markets, firms demand labor, while in product markets, consumers demand goods.
What is the difference between a shortage and a surplus of labor?
A shortage occurs when demand exceeds supply (wage too low), while a surplus occurs when supply exceeds demand (wage too high).
What is the difference between substitute and complementary resources in factor markets?
Substitute resources can be used in place of each other, while complementary resources are used together.
What is the difference between a shift in the labor demand curve and a movement along the curve?
A shift is caused by factors other than wage changes (e.g., productivity), while a movement along the curve is caused by a change in the wage rate.
What is the difference between a shift in the labor supply curve and a movement along the curve?
A shift is caused by factors other than wage changes (e.g., immigration), while a movement along the curve is caused by a change in the wage rate.
How do changes in product demand and changes in productivity differently affect labor demand?
Changes in product demand affect labor demand because firms need more labor to produce more goods. Changes in productivity affect labor demand because more productive workers are more valuable to firms.
How do changes in personal values and government regulations differently affect labor supply?
Changes in personal values (e.g., desire for leisure) directly influence workers' willingness to work. Government regulations (e.g., licensing) affect the ease with which people can enter the workforce.
How does the impact of a wage floor differ from that of a wage ceiling?
A wage floor (minimum wage) set above equilibrium creates a surplus of labor (unemployment). A wage ceiling set below equilibrium creates a shortage of labor.
What is the difference between the short-run and long-run effects of increased immigration on the labor market?
In the short run, increased immigration increases labor supply, potentially lowering wages. In the long run, increased demand for goods and services due to immigration may increase labor demand, offsetting wage decreases.
What is the difference between the effects of an increase in the supply of skilled labor versus an increase in the supply of unskilled labor?
An increase in the supply of skilled labor may decrease wages for skilled workers, while an increase in the supply of unskilled labor may decrease wages for unskilled workers. The overall impact depends on the relative demand for each type of labor.
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).
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.