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DePaul - ECON 106 - Class Notes - Week 12

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DePaul - ECON 106 - Class Notes - Week 12

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background image Demand for Labor Firm’s decision to hire labor Determined by the Marginal Productivity of Labor (MPL) MPL =    Q /     L What MPL represents is an extra production generated by hiring one extra worker Supply of Labor Worker’s decision to work Determined by the Opportunity Cost to Work (OCW) Higher OCW if: Higher education Higher value for alternatives to work Marginal Wages reflect OCW Opportunity Cost of Work OCW: Value of the best possible alternative to work Examples: Value of Leisure Unemployment Benefits Retirees and Pensions Value of Education Efficiency Wage Theory Workers Turnover Workers Effort Workers Quality Workers Productivity Workers Health Workers Purchasing power Optimal allocation is one that attains highest Indifference Curve and maximum 
utility, given budget constraint. 
Due to the convexity of the Indifference Curve, the optimal point is unique (there 
can only be one point)

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School: DePaul University
Department: Economics
Course: Principals of Microeconomics
Professor: Liliana Fargo
Term: Winter 2018
Tags:
Name: Microeconomics Notes
Description: Labor market
Uploaded: 03/20/2018
2 Pages 31 Views 24 Unlocks
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