Explain, using the marginal, opportunity cost, cost-benefit, and interdependence principles, why, in most occupations, the market labor supply curve is upward-sloping.
Use the marginal, opportunity cost, cost-benefit, and interdependence principles to explain why labor demand is typically downward-sloping.
The governor is concerned about poverty in the state and proposes that the state minimum wage be raised from $7.25 per hour to $15.00 per hour. She claims that this would be an effective way to assist lower income families; however, she is worried that a large number of jobs will be lost as a result. Briefly evaluate her arguments using a labor supply and demand graph. Explain how the long-run impact of the minimum wage law may be different than the short-run impact.
Think about the career you hope to have after college. What annual income do you hope to earn and how many hours per week do you plan on working? Use this information to find your future wage. Use the marginal principle to explain how the number of hours you work each week would change if you get an unexpected raise of 50%? A pay cut of 50%? Draw your labor supply curve for these values and describe the relationship between the income effect and substitution effect on your various wages.
During the period from 2007 to 2009, the number of new automobiles sold in the United States fell from 16 million to 10.4 million. How do you expect the decrease in demand for cars to affect the price of cars? During that same period, employment in motor vehicles and parts manufacturing fell from 1 million workers to 622,000. Why does a decrease in demand for cars lead to a decrease in demand for autoworkers?
Consider the labor market for grocery store cashiers. Who are the demanders in the market and who are the suppliers? The average hourly wage for cashiers is $10.93 per hour. Use a graph to illustrate the market for grocery store cashiers if labor supply is upward-sloping. Be sure to properly label the axes, curves, and equilibrium wage. Use the four core principles to describe why cashiers may have upward-sloping labor supply curves.
Judicial law clerks assist judges in court, conduct research for judges, and prepare legal documents. The table shows the quantity of labor supplied and the quantity of labor demanded in a market for judicial law clerks.
| Hourly wage ($ per hour) | Quantity of labor supplied (thousands of workers) | Quantity of labor demanded (thousands of workers) |
|---|---|---|
| $24 | 11 | 19 |
| $26 | 13 | 17 |
| $28 | 15 | 15 |
| $30 | 17 | 13 |
| $32 | 19 | 11 |
Use the data to graph the demand and supply curves for judicial law clerks. Be sure to properly label the axes, curves, and all values provided in the table. What are the equilibrium quantity of judicial law clerks and equilibrium wage in this market?
You have recently opened your own website design business. You charge your clients a price of $500 per project and are considering hiring additional workers to assist you in expanding your business.
The table provides data on your marginal product for each additional website designer you hire. Use the information to calculate the marginal revenue product, total output, and total revenue associated with each number of employees. The market wage for website designers is $2,800 per month. If this is the only cost you incur from hiring an additional worker, calculate the marginal cost and profits for each additional worker. Using the Rational Rule for Employers, how many workers should you hire each month? What’s the number of workers that maximizes your profits?
| Number of website designers | Marginal product (completed projects per month) |
|---|---|
| 1 | 10 |
| 2 | 9 |
| 3 | 8 |
| 4 | 7 |
| 5 | 6 |
| 6 | 5 |
Consider Gabriela’s marginal revenue product for each worker hired at Head Area Salon.
| Number of hair stylists | Marginal product (haircuts per week) | Marginal revenue product (marginal product: $20 per haircut) |
|---|---|---|
| 1 | 40 | $800 |
| 2 | 35 | $700 |
| 3 | 30 | $600 |
| 4 | 25 | $500 |
| 5 | 20 | $400 |
How many workers will Gabriela hire if the wage is $700 per worker? How many will Gabriela hire if the wage is $400 per worker? Complete the following table showing Gabriela’s demand for labor at various wages and then graph her labor demand curve.
| Wage ($ per worker per week) | Quantity of workers demanded |
|---|---|
| $900 | |
| $800 | |
| $700 | |
| $600 | |
| $500 | |
| $400 |
In 2017, Apple told its suppliers to prepare for the sale of 100 million iPhones; however, in 2018 Apple updated its projections and informed suppliers that it expected iPhone demand to be lower. Given this reduction in demand for iPhones, how will the marginal revenue product of employees in stores selling the iPhone change? Use a graph to illustrate the impact of this change on the labor market for iPhone sales workers.
State whether each of the following events will result in a movement along General Motor’s (GM’s) demand curve for labor in their U.S. automobile factories or whether it will cause its demand curve for labor to shift (and in which direction). Draw a graph that shows the change you predict.
The number of bank tellers declined from an average of 20 per branch in 1988 to 13 in 2004, as ATMs replaced human tellers. This meant that the cost of running each branch fell. Banks responded by increasing the number of urban bank branches by 43% in the same time period, which increased the total number of bank employees. So ATMs shifted employees’ work from routine tasks like deposits and withdrawals towards skills machines cannot provide, such as sales and customer service.
When the use of ATMs became more prevalent and reduced the overall costs to banks, in terms of the impact on labor, did the scale effect or the substitution effect dominate? On net, would labor and capital be considered substitutes or complements in this industry?
Nicole works as a research assistant. When her wage rate was $20 per hour, she worked 35 hours per week. When her wage rate rose to $30 per hour, she decided to work 40 hours per week. When her wage rate rose further to $40, she decided to work 30 hours per week. Draw Nicole’s individual labor supply curve. Indicate on your graph the range of wages over which the income effect dominates for Nicole and the range of wages over which the substitution effect dominates.
Consider the labor market for workers building boats. For each of the following scenarios draw a graph showing the effect on the labor market for boat builders. How does the equilibrium wage and number of boat builders change?
Determine whether each of the following events will result in a movement along the market supply curve for labor in the fast-food industry or whether it will cause the market supply curve for labor to shift. If the supply curve shifts, indicate whether it will shift to the left or to the right.