平狄克微观经济学Markets for Factor s.ppt

1、Chapter 14,Markets for Factor Inputs,Chapter 14,2,Topics to be Discussed,Competitive Factor Markets Equilibrium in a Competitive Factor Market Factor Markets with Monopsony Power Factor Markets with Monopoly Power,Chapter 14,3,Competitive Factor Markets,Characteristics Large number of sellers of the

2、 factor of production Large number of buyers of the factor of production The buyers and sellers of the factor of production are price takers,Chapter 14,4,Competitive Factor Markets,Demand for a factor input when only one input is variable: Factor demands are derived demand Demand for an input that d

3、epends on, and is derived from, both the firms level of output and the cost of inputs Demand for computer programmers is derived from how much software Microsoft expects to sell,Chapter 14,5,Factor Input Demand One Variable Input,Assume firm produces output using two inputs: Capital (K) and Labor (L

4、) Hired at prices r (rental cost of capital) and w (wage rate) K is fixed (short run analysis) and L is variable Firm must decide how much labor to hire,Chapter 14,6,Factor Input Demand One Variable Input,How does a firm decide if it is profitable to hire another worker? If the additional revenue fr

5、om the output of hiring another worker is greater than its cost Marginal Revenue Product of Labor (MPRL) Additional revenue resulting from the sale of output created by the use of one additional unit of an input,Chapter 14,7,Factor Input Demand One Variable Input,The incremental cost of a unit of la

6、bor is the wage rate, w Profitable to hire more labor if the MRPL is at least as large as the wage rate, w Must measure the MRPL,Chapter 14,8,Factor Input Demand One Variable Input,MRPL is the additional output obtained from an additional unit of labor, multiplied by the additional revenue from an e

7、xtra unit of output Additional output is given by MPL and additional revenue is MR,Chapter 14,9,Factor Input Demand One Variable Input,Chapter 14,10,Factor Input Demand One Variable Input,In a competitive market, MR = P This means, for a competitive market,Graphically, diminishing marginal returns,

8、MPL falls as L increases,Chapter 14,11,Marginal Revenue Product,Hours of Work,Wages ($ per hour),Chapter 14,12,Factor Input Demand One Variable Input,Choosing the profit-maximizing amount of labor: If MRPL w (the marginal cost of hiring a worker): hire the worker If MRPL w: hire less labor If MRPL =

9、 w: profit maximizing amount of labor,Chapter 14,13,In a competitive labor market, a firm faces a perfectly elastic supply of labor and can hire as many workers as it wants at w*.,Hiring by a Firm in the Labor Market,Quantity of Labor,Price of Labor,The profit maximizing firm will hire L* units of l

10、abor at the point where the marginal revenue product of labor is equal to the wage rate.,Chapter 14,14,Factor Input Demand One Variable Input,Quantity of labor demand changes in response to the wage rate If the market supply of labor increases relative to demand (baby boomers or female entry), a sur

11、plus of labor will exist and the wage rate will fall,Chapter 14,15,A Shift in the Supply of Labor,Quantity of Labor,Price of Labor,Chapter 14,16,Factor Input Demand One Variable Input,Comparing Input and Output Markets,Chapter 14,17,Factor Input Demand One Variable Input,Both the hiring and output c

12、hoices of the firm follow the same rule Inputs or outputs are chosen so that marginal revenue from the sale of output is equal to marginal cost from the purchase of inputs True for both competitive and noncompetitive markets,Chapter 14,18,Factor Input Demand Many Inputs,In choosing more than one var

13、iable input, a change in the price of one input changes the demand for the others Scenario Producing farm equipment with two variable inputs: Labor Assembly-line machinery,Chapter 14,19,Factor Input Demand Many Inputs,If the wage rate falls: More labor will be demanded even if amount of machinery do

14、es not change MC of producing farm equipment falls Profitable for firm to increase output Will invest in additional machinery to expand production MRPL will shift right, quantity of labor demanded increases,Chapter 14,20,Factor Input Demand Many Inputs,If wage rate is $20/hr, firm hires 100 worker h

15、ours point A Wage rate falls to $15/hr MRPL W, firm demands more labor MRPL1 is demand for labor w/machinery fixed Increased labor causes MPK to rise, encouraging the firm to rent more machinery MPL increases MRPL curve shifts right, firm uses 140 hrs labor,Chapter 14,21,Factor Input Demand Many Inp

16、uts,When the wage rate falls to $15, the MRP curve shifts, generating a new point C on the firms demand for labor curve. Thus A and C are on the demand for labor curve, but B is not.,Chapter 14,22,Market Demand Curve,All firms demand for labor vary substantially Assume that all firms respond to a lo

17、wer wage All firms would hire more workers Market supply would increase The market price will fall The quantity demanded for labor by the firm will be smaller,Chapter 14,23,Industry Demand for Labor,Labor (worker-hours),Labor (worker-hours),Wage ($ per hour),Wage ($ per hour),0,5,10,15,0,5,10,15,50,

18、100,150,L0,L2,120,L1,Firm,Industry,Chapter 14,24,The Industry Demand for Labor,If the wage rate falls for all firms in industry, all firms will demand more labor More industry output and supply for output will rise, causing prices to fall The increase in labor is smaller than if the product price we

19、re fixed Adding all labor demand curves in all industries gives market demand curve for labor,Chapter 14,25,The Demand for Jet Fuel,Jet fuel is a factor (input) for airlines Cost of jet fuel 1971 Jet fuel cost equaled 12.4% of total operating cost 1980 Jet fuel cost equaled 30.0% of total operating

20、cost 1990s Jet fuel cost equaled 15.0% of total operating cost,Chapter 14,26,The Demand for Jet Fuel,Airlines responded to higher prices in the 1970s by reducing the quantity of jet fuel used Output of airlines (ton-miles) increased by 29.6% and jet fuel consumed rose by 8.8% Effect of increased fue

21、l costs on airlines depends on ability to cut fuel usage by reducing weight,Chapter 14,27,The Demand for Jet Fuel,Price elasticity of demand for jet fuel depends on ability to conserve fuel and elasticities of demand and supply of travel The demand for jet fuel impacts the airlines and refineries al

22、ike The short-run price elasticity of demand for jet fuel is very inelastic,Chapter 14,28,Short-Run Price Elasticityof Demand for Jet Fuel,American-0.06Delta-0.15 Continental-0.09TWA-0.10 Northwest-0.07United-0.10,AirlineElasticityAirlineElasticity,Chapter 14,29,The Demand for Jet Fuel,There is no g

23、ood substitute for jet fuel Long run elasticity of demand is higher, however, because airlines can eventually introduce more energy-efficient airplanes Can show short- and long-run demands for jet fuel MRPSR is much less elastic than long run demand since it takes time to substitute,Chapter 14,30,Th

24、e Short- and Long-RunDemand for Jet Fuel,Quantity of Jet Fuel,Price,Chapter 14,31,The Supply of Inputs to a Firm,In a competitive market, a firm can purchase as much of an input it wants at the market price Determined by supply/demand of input market Input supply to a firm is perfectly elastic Firm

25、is small part of market so does not affect market price,Chapter 14,32,A Firms Input Supply in a Competitive Factor Market,Yards of Fabric (thousands),Yards of Fabric (thousands),Price ($ per yard),Price ($ per yard),Chapter 14,33,The Supply of Inputs to a Firm,Remember that the supply curve is the a

26、verage expenditure curve Supply curve representing the price per unit that the firm pays for a good Also, marginal expenditure curve represents the firms expenditures on an additional unit that it buys Analogous to MR curve in output market,Chapter 14,34,The Supply of Inputs to a Firm,When factor ma

27、rket is competitive, average expenditure and marginal expenditure are identical horizontal lines How much of the input should the firm purchase? As long as MRP ME, profit can be increased by buying more input When MRP ME, benefits lower than costs,Chapter 14,35,The Supply of Inputs to a Firm,Profit

28、maximization requires the marginal expenditure to be equal to the marginal revenue product ME = MRP A special case of competitive output market shows profit maximization where ME = w,Chapter 14,36,The Market Supply of Inputs,The market supply for factor inputs is upward sloping Examples: jet fuel, f

29、abric, steel The market supply for labor may be upward sloping and backward bending,Chapter 14,37,The Supply of Inputs to a Firm,The Supply of Labor The choice to supply labor is based on utility maximization Leisure competes with income for utility Wage rate measures the price of leisure Higher wag

30、e rate causes the price of leisure to increase,Chapter 14,38,The Market Supply of Inputs,The Supply of Labor Higher wages encourage workers to substitute work for leisure The substitution effect Higher wages allow the worker to purchase more goods, including leisure, which reduces work hours The inc

31、ome effect,Chapter 14,39,Competitive Factor Markets,The Supply of Labor If the income effect exceeds the substitution effect, the supply curve is backward bending By using utility and budget line graph, we can show how the supply curve can be backward bending Can show how the income effect can excee

32、d the substitution effect,40,Substitution and Income Effects of Wage Increase,Worker initially chooses point A: 16 hours leisure, 8 hour work Income = $80,Wage increases to $30. New budget line RQ. 19 hours leisure, 5 hours work Income = $150,Income effect overrides substitution effect,Chapter 14,41

33、,Backward-Bending Supply of Labor,Hours of Work per Day,Wage ($ per hour),Chapter 14,42,Labor Supply for One- andTwo-Earner Households,In twentieth century, the percent of females in labor force has increased 1950 34% 2001 60% Compared the work choices of 94 unmarried females with work decisions of

34、heads of households and spouses in 397 families Can describe work decisions by calculating elasticity of supply for labor,Chapter 14,43,Elasticities of Labor Supply (Hours Worked),Chapter 14,44,Labor Supply for One- andTwo-Earner Households,When higher wage rate leads to fewer hours worked: Labor su

35、pply curve is backward bending Income effect outweighs the substitution effect Elasticity of labor supply is negative,Chapter 14,45,Equilibrium in a Competitive Factor Market,Competitive factor market is in equilibrium when the prevailing price equates quantity supplied and quantity demanded Since w

36、orkers are well informed, all receive the same wage and generate identical MRPL when employed,Chapter 14,46,Equilibrium in a Competitive Factor Market,If output market is perfectly competitive, demand curve for an input measures benefit consumers place on use of input in production process Wage rate

37、 also reflects the cost of the firm and to society of using additional unit of input At equilibrium, MBL = MCL = wage,Chapter 14,47,Equilibrium in a Competitive Factor Market,When output and input markets are both perfectly competitive, resources are used efficiently Maximize TB TC Efficiency requir

38、es that MRPL equals the benefit to consumers of the additional output, given by (P)(MPL),Chapter 14,48,Equilibrium in a Competitive Factor Market,If output market is not competitive: MRPL = (P)(MPL) no longer holds (P)(MPL) MRPL At equilibrium number of workers, marginal cost to firm, wM, is less th

39、an marginal benefit to consumers, vM Although the firm maximizes profits, output is below efficient level and uses less than efficient level of output,Chapter 14,49,Equilibrium in a Competitive Factor Market,If output market is not competitive: Although the firm maximizes profits, output is below ef

40、ficient level and uses less than efficient level of input Economic efficiency would be increased if more laborers were hired and more output were produced Gains to consumers would outweigh firms lost profit,Chapter 14,50,Labor Market Equilibrium,Number of Workers,Number of Workers,Wage,Wage,Competit

41、ive Output Market,Monopolistic Output Market,Chapter 14,51,Equilibrium in aCompetitive Factor Market,Economic Rent For a factor market, economic rent is the difference between the payments made to a factor of production and the minimum amount that must be spent to obtain the use of that factor The e

42、conomic rent associated with the employment of labor is the excess of wages paid above the minimum amount needed to hire workers,Chapter 14,52,Economic Rent,Number of Workers,Wage,0,Chapter 14,53,Equilibrium in aCompetitive Factor Market,Land: A Perfectly Inelastic Supply Occurs when land for housin

43、g or agriculture is fixed, at least in short run Its price is determined entirely by demand When demand increases, rental value per unit increases and total land rent increases,Chapter 14,54,Economic Rent,Land Rent,Number of Acres,Price ($ per acre),When demand increases, price and economic rent inc

44、rease.,Chapter 14,55,Pay in the Military,During the Civil War, 90% of the armed forces were unskilled workers involved in ground combat Today, only 16% are unskilled workers involved in ground combat Lead to severe shortages in skilled workers,Chapter 14,56,Pay in the Military,Rank structure has sta

45、yed the same Pay increases are determined primarily by years of service Similarly, officers with differing skill levels are often paid similar salaries Many skilled workers leave the army since salaries in private sector are much higher,Chapter 14,57,The Shortage ofSkilled Military Personnel,Number

46、of Skilled Workers,Wage,Chapter 14,58,Pay in the Military,Solution Selective reenlistment bonuses targeted at skilled jobs where there are shortages With increases in demand for skilled military jobs, we should expect the military to increase reenlistment bonuses and other market based incentives,Ch

47、apter 14,59,Factor Markets with Monopsony Power,We showed before that many firms have monopsony buying power US automobile companies as buyers of parts and components Assume The output market is perfectly competitive Input market is pure monopsony,Chapter 14,60,Factor Markets with Monopsony Power,Ma

48、rginal and Average Expenditure When choosing to purchase a good, increase amount purchased until the marginal value equals marginal expenditure Price paid for good is average expenditure and is equal to marginal expenditure,Chapter 14,61,Factor Markets with Monopsony Power,Since a monopsonist pays t

49、he same price for each unit, the supply curve is the average expenditure curve Upward sloping, since deciding to buy an extra unit raises price it must pay for all units For profit maximizing firm, marginal expenditure curve lies above the average expenditure curve Firm must pay all units the higher

50、 price, not just last unit hired,62,Marginal and Average Expenditure,Units of Input,Price (per unit of input),0,1,2,3,4,6,5,5,10,15,20,Hires where ME = MRP LC is competitive market level,Chapter 14,63,Factor Markets with Monopsony Power,Examples of Monopsony Power Government Soldiers Missiles B2 Bom

51、bers NASA Astronauts Company town,Chapter 14,64,Monopsony Power in the Market for Baseball Players,Baseball owners operate a monopsonistic cartel Reserve clause prevented competition for players Each player tied to one team for life Once drafted, could not play for another team unless rights were so

52、ld Baseball owners had monopsony power in negotiating new contracts,Chapter 14,65,Monopsony Power in the Market for Baseball Players,During 1960s and 70s, players salaries were far below market value of MP If competitive market Players receiving $42,000 in 1969 would have instead received a salary o

53、f $300,000 in 1969 dollars Strike in 1972 followed by lawsuit,Chapter 14,66,Monopsony Power inthe Market for Baseball Players,In 1975, players could become free agents after playing for a team for six years Reserve clause no longer in effect Market became more competitive From 1975 to 1980, expendit

54、ures on players contracts went from 25% of team expenditures to 40% Average player salary doubled in real terms,Chapter 14,67,Factor Markets with Monopoly Power,Just as buyers of inputs can have monopsony power, sellers of inputs can have monopoly power The most important example of monopoly power i

55、n factor markets involves labor unions,Chapter 14,68,Demand with no monopsony power. Supply of union labor w/ no monopoly power. Labor market competitive with L* workers hired at wage w* Demand equals Supply,Monopoly Power of Sellers of Labor,Number of Workers,Wage per worker,Chapter 14,69,Monopoly

56、Power of Sellers of Labor,The unions monopoly power allows it to choose any wage rate and quantity supplied If it wanted to maximize number of workers hired, it would choose competitive outcome If it wanted to obtain higher wages, it would restrict membership to L1 workers to get higher wage w1 Thos

57、e who find jobs are better off. Those without jobs are worse off.,Chapter 14,70,Labor market competitive with L* workers hired at wage w* Labor sellers with monopoly power at L1 and w1,Monopoly Power of Sellers of Labor,Number of Workers,Wage per worker,Chapter 14,71,Monopoly Power of Sellers of Lab

58、or,Is restrictive union worthwhile? Yes, if maximizing economic rent is the goal The union acts like a monopolist restricting output to maximize profits Rent for a union represents the wages earned in excess of opportunity cost Union must choose workers so that the marginal cost equals the marginal

59、revenue,Chapter 14,72,Monopoly Power of Sellers of Labor,Cost is the marginal opportunity cost since it is a measure of what an employer has to offer an additional worker to get him or her to work for the firm But, the wage necessary to encourage additional workers to take jobs is given by supply curve for labor, SL,Chapter 14,73,Monopoly Power of Sellers of Labor,Rent maximizing combination of wage rate and number of workers is where MR crosses supply Price comes from the demand curve This gives a combination of L1 and w1