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1、6 THE ECONOMICS OF LABOR MARKETS18The Markets for the Factors of Production The Markets for the Factors of ProductionvFactors of production are the inputs used to produce goods and services.The Market for the Factors of ProductionvThe demand for a factor of production is a derived demand.vA firms de
2、mand for a factor of production is derived from its decision to supply a good in another market.THE DEMAND FOR LABORvLabor markets, like other markets in the economy, are governed by the forces of supply and demand.Figure 1 The Versatility of Supply and DemandQuantity ofApples0Price ofApplesDemandSu
3、pplyDemandSupplyQuantity ofApple Pickers0Wage ofApplePickers(a) The Market for Apples(b) The Market for Apple PickersPQLWTHE DEMAND FOR LABORvMost labor services, rather than being final goods ready to be enjoyed by consumers, are inputs into the production of other goods.The Production Function and
4、 the Marginal Product of LaborvThe production function illustrates the relationship between the quantity of inputs used and the quantity of output of a good.Table 1 How the Competitive Firm Decides How Much Labor to HireFigure 2 The Production FunctionProductionfunctionQuantity ofApple Pickers0Quant
5、ityof Apples30028024018010012345The Production Function and the Marginal Product of LaborvThe marginal product of labor is the increase in the amount of output from an additional unit of labor.MPL = Q/LMPL = (Q2 Q1)/(L2 L1)The Production Function and the Marginal Product of LaborvDiminishing Margina
6、l Product of LaborAs the number of workers increases, the marginal product of labor declines. As more and more workers are hired, each additional worker contributes less to production than the prior one.The production function becomes flatter as the number of workers rises.This property is called di
7、minishing marginal product.The Production Function and the Marginal Product of LaborvDiminishing marginal product refers to the property whereby the marginal product of an input declines as the quantity of the input increases.Figure 2 The Production FunctionProductionfunctionQuantity ofApple Pickers
8、0Quantityof Apples30028024018010012345The Value of the Marginal Product and the Demand for LaborvThe value of the marginal product is the marginal product of the input multiplied by the market price of the output.VMPL = MPL P The Value of the Marginal Product and the Demand for LaborvThe value of th
9、e marginal product (also known as marginal revenue product) is measured in dollars.vIt diminishes as the number of workers rises because the market price of the good is constant (The output market is a competitive market).The Value of the Marginal Product and the Demand for LaborvTo maximize profit,
10、 a competitive, profit-maximizing firm hires workers up to the point where the value of the marginal product of labor equals the wage. VMPL = Wage(MR=MC)The Value of the Marginal Product and the Demand for LaborvThe value-of-marginal-product curve is the labor demand curve for a competitive, profit-
11、maximizing firm.Figure 3 The Value of the Marginal Product of Labor0Quantity ofApple Pickers0Value of theMarginalProductValue of marginal product(demand curve for labor)MarketwageProfit-maximizing quantityFYIInput Demand and Output SupplyvWhen a competitive firm hires labor up to the point at which
12、the value of the marginal product equals the wage, it also produces up to the point at which the price equals the marginal cost.Corollary: Input Demand and Output Supply MCMPLWhat Causes the Labor Demand Curve to Shift?vOutput PricevTechnological ChangevSupply of Other factorsTHE SUPPLY OF LABORvThe
13、 labor supply curve reflects how workers decisions about the labor-leisure tradeoff respond to changes in opportunity cost (which will be explained in chapter21).vAn upward-sloping labor supply curve means that an increase in the wages induces workers to increase the quantity of labor they supply.Fi
14、gure 4 Equilibrium in a Labor MarketWage(price oflabor)0Quantity ofLaborSupplyWhat Causes the Labor Supply Curve to Shift?vChanges in TastesvChanges in Alternative OpportunitiesvImmigrationEQUILIBRIUM IN THE LABOR MARKETvThe wage adjusts to balance the supply and demand for labor.vThe wage equals th
15、e value of the marginal product of labor.Figure 4 Equilibrium in a Labor MarketWage(price oflabor)0Quantity ofLaborSupplyDemandEquilibriumwage, WEquilibriumemployment, LEQUILIBRIUM IN THE LABOR MARKETvLabor supply and labor demand determine the equilibrium wage.vShifts in the supply or demand curve
16、for labor cause the equilibrium wage to change.Figure 5 A Shift in Labor SupplyWage(price oflabor)0Quantity ofLaborSupply, SDemand2. . . . reducesthe wage . . .3. . . . and raises employment.1. An increase inlabor supply . . .SWLWLShifts in Labor SupplyvAn increase in the supply of labor :Results in
17、 a surplus of labor.Puts downward pressure on wages.Makes it profitable for firms to hire more workers.Results in diminishing marginal product.Lowers the value of the marginal product.Gives a new equilibrium. Figure 6 A Shift in Labor DemandWage(price oflabor)0Quantity ofLaborSupplyDemand, D2. . . .
18、 increasesthe wage . . .3. . . . and increases employment.DWLWL1. An increase inlabor demand . . .Shifts in Labor DemandvAn increase in the demand for labor :Makes it profitable for firms to hire more workers.Puts upward pressure on wages.Raises the value of the marginal product.Gives a new equilibr
19、ium. Table 2 Productivity and Wage Growth in the United States.OTHER FACTORS OF PRODUCTION: LAND AND CAPITALvCapital refers to the equipment and structures used to produce goods and services.The economys capital represents the accumulation of goods produced in the past that are being used in the pre
20、sent to produce new goods and services.OTHER FACTORS OF PRODUCTION: LAND AND CAPITALvPrices of Land and CapitalThe purchase price is what a person pays to own a factor of production indefinitely.The rental price is what a person pays to use a factor of production for a limited period of time.Equilib
21、rium in the Markets for Land and CapitalvThe rental price of land and the rental price of capital are determined by supply and demand. The firm increases the quantity hired until the value of the factors marginal product equals the factors price.Figure 7 The Markets for Land and CapitalQuantity ofLa
22、nd0RentalPrice ofLandDemandSupplyDemandSupplyQuantity ofCapital0RentalPrice ofCapitalQP(a) The Market for Land(b) The Market for CapitalPQEquilibrium in the Markets for Land and CapitalvEach factors rental price must equal the value of its marginal product. vThey each earn the value of their margina
23、l contribution to the production process.Linkages among the Factors of ProductionvFactors of production are used together.The marginal product of any one factor depends on the quantities of all factors that are available.Linkages among the Factors of ProductionvA change in the supply of one factor a
24、lters the earnings of all the factors.Linkages among the Factors of ProductionvA change in earnings of any factor can be found by analyzing the impact of the event on the value of the marginal product of that factor.SummaryvThe economys income is distributed in the markets for the factors of product
25、ion.vThe three most important factors of production are labor, land, and capital.vThe demand for a factor, such as labor, is a derived demand that comes from firms that use the factors to produce goods and services.SummaryvCompetitive, profit-maximizing firms hire each factor up to the point at whic
26、h the value of the marginal product of the factor equals its price.vThe supply of labor arises from individuals tradeoff between work and leisure.vAn upward-sloping labor supply curve means that people respond to an increase in the wage by enjoying less leisure and working more hours.SummaryvThe pri
27、ce paid to each factor adjusts to balance the supply and demand for that factor.vBecause factor demand reflects the value of the marginal product of that factor, in equilibrium each factor is compensated according to its marginal contribution to the production of goods and services.SummaryvBecause factors of production are used together, the marginal product of any one factor depends on the quantities of all factors that are available.vAs a result, a change in the supply of one factor alters the equilibrium earnings of all the factors.
