Ch3_Labor Demand 鲍哈斯劳动经济学

Utility function, indifference curve, budget constraint

Intensive margin: hours of work decision

Change in nonlabor income, wage Income effect, substitution effect

If VMPL kept rising, the firm would maximize profits by expanding indefinitely. The law of diminishing returns sets limits on the size of the firm.
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Employment Decision in the Short-Run
Short-Run Hiring Decision
19

Value of Marginal Product of Labor (VMPL): the dollar benefit derived from hiring an additional worker, holding capital constant ������������������������ = ������ × ������������������

13
• MP > AP when AP is rising → MP < AP when AP is decreasing • MP and AP intersect when AP peaks.
14
The Firm’s Production Function
15

Marginal product of labor (MPL): the change in output resulting from hiring an additional worker, holding constant the quantities of other inputs.
Added worker effect Discouraged worker effect
Review Question (#2-9)
7
Consider two workers with identical preferences, Phil and Bill. Both workers have the same life cycle wage path in that they face the same wage at every age, and they know what their future wages will be. Leisure and consumption are both normal goods.
(a)
Compare the life cycle path of hours of work between the two workers if Bill receives a one-time, unexpected inheritance at the age of 35. Compare the life cycle path of hours of work between the two workers if Bill had always known he would receive (and, in fact, does receive) a one-time inheritance at the age of 35.
Last Week
Labor Supply
2

Employed, Unemployed, Out of Labor Force

Labor Force Participation Rate Employment Rate Unemployment Rate
Labor Supply
3

Labor-leisure model



The Firm’s Production Function
10

Firm’s production function: describes the technology that the firm uses to produce goods and services.
The firm’s output can be produced by a variety of capital– labor combinations.

Value of Average Product of Labor (VAPL): the dollar value of output per worker ������������������������ = ������ × ������������������
Suppose p=$2
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17
Labor Demand: Short & Long-Run
In the Long-Run, The firm can adjust both capital and labor.
In the Short-Run, The firm is “stuck” with a fixed capital stock and cannot adjust its size easily.
Policy Applications



Cash Grants EITC
Labor Supply
6

Labor Supply Over the Life Cycle

Evolutionary wage change

Labor Supply Over the Business Cycle

������������������������������������������ = ������������ – ������������ – ������������


p: price of output, w: wage rate, r: price of capital Total Revenue = ������������ Total Costs = (������������ + ������������)


q: output L: labor (total hours hired by firm) K: capital ������ = ������(������, ������)
The Firm’s Production Function
11

Two assumptions about L


Perfectly competitive firm: a firm that cannot influence prices of output or inputs (p, w, r constant). A perfectly competitive firm maximizes profits by hiring the “right” amount of labor and capital.
1. 2. 3.
Graph budget line. Find ������������������ and ������������������ . Use tangency condition ������������������ = ������.
Labor Supply
5

Labor Supply of Women

MPL is the slope of the total product curve, holding capital fixed. Law of diminishing returns: eventually, MPL declines

Average product (AP): the amount of output produced by the typical worker

������ ������������ = ������ Assumption of diminishing returns also implies that the AP will eventually decline.
Profit Maximization
16
wenku.baidu.com
Objective of the firm is to maximize profits.
12

Marginal product of capital (MPK): the change in output resulting from employing one additional unit of capital, holding constant the quantities of other inputs. Marginal product of labor (MPL): the change in output resulting from hiring an additional worker, holding constant the quantities of other inputs.
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Short-Run Hiring Decision
22

How many workers should the firm hire?
1. 2.
3.

������������������������ = ������ ������������������������ is declining ������������������������ ≤ ������������������������ The marginal gain from hiring an additional worker equals the cost of that hire. It does not pay to further expand the firm because the value of hiring more workers is falling.
(b)
CH.3 LABOR DEMAND
Jisoo Hwang 2014 Fall
Introduction
9

Firms hire workers because consumers want to purchase a variety of goods and services.
Demand for workers is derived from the wants and desires of consumers. “Derived demand” Central question: how many workers are hired and what are they paid?
There are 168 hours in the week available to split between work and leisure. Shelly earns $5 per hour after taxes. She also has $320 worth of nonlabor income each week. Find Shelly’s optimal amount of (C,L) and her reservation wage.
1.
2.
L: number of workers hired × average number of hours worked per person Different types of workers can be aggregated to a single input “labor”
The Firm’s Production Function

Extensive margin: whether to work decision

Reservation wage

Labor supply curve

Labor supply elasticity
Review Question (#2-6)
4
Shlley’s preferences for consumption and leisure: ������ ������, ������ = ������ − 200 × ������ − 80