【正文】 f a factor of production is called the value of marginal product. The Demand for a Factor of Production 169。 2020 Pearson AddisonWesley –VMP equals marginal product of labor multiplied by the market price of the good produced. The Demand for a Factor of Production 169。 2020 Pearson AddisonWesley ?The firm maximizes its profit by hiring the quantity of labor at which VMP = the wage rate. ?If VMP exceeds the wage rate, the firm can increase profit by employing one more worker. ?If VMP is less than the wage rate, the firm can increase profit by firing one worker. ?Only if VMP equals the wage rate is the firm maximizing profit. The Demand for a Factor of Production 169。 2020 Pearson AddisonWesley –The value of marginal product curve passes through the midpoints of the bars. –The VMP of the 3rd worker is $10 an hour. –So at a wage rate of $10 an hour, the firm hires 3 workers on its demand for labor curve. The Demand for a Factor of Production 169。 2020 Pearson AddisonWesley ?The Price of the Firm’s Output ?The higher the price of a firm’s output, the greater is the firm’s demand for labor. ?The price of output affects the demand for labor through its influence on the value of marginal product of labor. ?If the price of the firm’s output increases, the demand for labor increases and the demand for labor curve shifts rightward. The Demand for a Factor of Production 169。 2020 Pearson AddisonWesley ?Technology ?New technologies decrease the demand for some types of labor and increase the demand for other types. ?For example, if a new automated breadmaking machine bees available, a bakery might install one of these machines and fire most of its workforce— a decrease in the demand for bakery workers. ?But the firms that manufacture and service automated breadmaking machines hire more labor, so there is an increase in the demand for this type of labor. The Demand for a Factor of Production 169。 2020 Pearson AddisonWesley ?The Market Supply of Labor –An Individual’s Labor Supply Decision –People allocate their time between leisure and labor and this choice, which determines the quantity of labor supplied, depends on the wage rate. –A person’s reservation wage is the lowest wage rate for which he or she is willing to supply labor. –As the wage rate rises above the reservation wage, the household changes the quantity of labor supplied. Labor Markets 169。 2020 Pearson AddisonWesley –Substitution Effect –At wage rates below $25 an hour, the higher the wage rate the greater is the quantity of labor that Jill supplies. –The wage rate is Jill’s opportunity cost of leisure. –The substitution effect describes how a person responds to an increasing opportunity cost of leisure. –The person reduces the amount of leisure and increases the quantity of labor supplied. Labor Markets 169。 2020 Pearson AddisonWesley –Individual’s Supply of Labor Curve –At low wage rates the substitution effect dominates the ine effect, so a rise in the wage rate increases the quantity of labor supplied. –At high wage rates the ine effect dominates the substitution effect, so a rise in the wage rate decreases the quantity of labor supplied. –The labor supply curve slopes upward at low wage rates but eventually bends backward at high wage rates. Labor Markets 169。 2020 Pearson AddisonWesley ?Competitive Labor Market Equilibrium ?Labor market equilibrium determines the wage rate and the number of worker employed. Labor Markets 169。 2020 Pearson AddisonWesley ?Labor Market Equilibrium with a Union –Unions try to restrict the supply for union labor and raise the wage rate. –But this action also decreases the quantity of labor demanded. –So the union tries to increase the demand for labor. Labor Markets 169。 2020 Pearson AddisonWesley –Like all firms, the monopsony has a downwardsloping demand for labor curve. –The supply curve of labor tells us the lowest wage rate of which a given quantity of labor is willing to work. Labor Markets 169。 2020 Pearson AddisonWesley –The monopsony pays the lowest wage rate for which that quantity of labor will work. –Compared to a petitive labor market, the monopsony employs fewer workers and pays a lower wage rate. Labor Markets 169。 2020 Pearson AddisonWesley ?Monopsony and the Minimum Wage –The imposition of a minimum wage might actually increase the quantity of labor hired by a monopsony. –Figure shows why. Labor Markets 169。 2020 Pearson AddisonWesley –For more than 150 workers, the supply of labor curve is S and the marginal cost of labor curve is MCL. –With the minimum wage, the monopsony increases the quantity of labor hired and pays a higher wage rate than with no minimum wage rate. Labor Markets