Resource Markets: Summary of Labor Markets
| Demand for workers (by firms) | Supply of workers |
| Benefit-cost rule: Hire more labor as long as the extra revenue generated by the worker (called the "marginal revenue product of labor," MRPL) exceeds or at least covers the worker's wage. | Benefit-cost rule: Work more as long as the wage you get (PL) exceeds or at least covers the opportunity cost of your time. |
| What makes demand for labor shift up/right?
(1) a higher price for the firm's output (2) higher worker productivity (the opposite changes would make demand shift down/left) |
What makes supply shift right?
(1) A larger pool of potential workers (the opposite change would make supply shift left) |
| What makes workers more productive?
(1) Technological improvements (2) Education and training |
What are some of the causes of a larger pool of potential workers (shifting
supply right)?
For the labor market as a whole: (1) a larger working-age population In specific industries: (1) easier job qualifications (2) nonpecuniary (nonmentary) benefits (also called compensating differentials) (3) reduced employment opportunities elsewhere |