The Demand for Resources

Unit 5: The Resource Market Copyright ACDC Leadership 2015 1 Shifter Review 3 Resource Demand Shifters (Based on MRP) 1. Demand (price) of the product 2. Productivity of the resource 3. Price of related resources 3 Resource Supply Shifters 1. Number of qualified workers Education, training, & abilities required 2. Government regulation/licensing Ex: What if waiters had to obtain a license to serve food? 3. Personal values and traditions regarding leisure time and societal rolls. Ex: Why did the US Labor supply increase during WWII? Copyright

ACDC Leadership 2015 2 Monopsony Copyright ACDC Leadership 2015 Resource Markets Perfect Competition Monopsony Imperfect Competition: Monopsony Characteristics: One firm hiring workers The firm is large enough to manipulate the market Workers are relatively immobile Firm is wage maker

To hire additional workers the firm must increase the wage Examples: Central American Sweat Shops Midwest small town with a large Car Plant NCAA Copyright ACDC Leadership 2015 4 Assume that this firm CANT wage discriminate and must pay each worker the same wage. Acme Coal Mining Co. Copyright ACDC Leadership 2015 Wage rate (per hour)

Number of Workers $4.00 0 4.50 1 5.00 2 5.50 3 6.00

4 7.00 5 8.00 6 9.00 7 10.00 8 Marginal Resource Cost Assume that this firm CANT wage discriminate and

must pay each worker the same wage. Acme Coal Mining Co. Wage rate (per hour) Number of Workers Marginal Resource Cost $4.00 0 - 6.00 4 7.50

7.00 5 11 8.00 6 13 9.00 7 15 10.00 8

17 4.50 1 $4.50 MRC doesnt 5.00 2 5.50 equal3 wage 6.50 5.50 Copyright ACDC Leadership 2015 Monopsony If the firm cant wage discriminate, where is MRC? MRC Wage

SL WE DL=MRP Copyright ACDC Leadership 2015 QE Identify the wage and quantity of labor that would be hired by this monopsony Wage MRC $15 Supply of Labor $12 $10

$9 Wage=$9 Quantity= Q2 MRP Copyright ACDC Leadership 2015 Q1 Q2 Q3 Quantity 8 Monopoly vs. Monopsony MRC Wage SL WE

Price QE DL=MRP QL MC PE D MR Copyright ACDC Leadership 2015 Q Q Labor Unions Goal is to increasing wages and benefits

Copyright ACDC Leadership 2015 How do Unions Increase Wages? 1. Convince Consumers to buy only Union Products Ex: Advertising the quality of union/domestic products 2. Lobbying government officials to increase demand Ex: Teachers Union petitions governor to increase spending. 3. Increase the price of substitute resources Ex: Unions support increases in minimum wage so employers are less likely to seek non-union workers Copyright ACDC Leadership 2015 12

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