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    in contrast to goods and services markets, ______________ are rare in labor markets, because rules that prevent people from earning more income are not politically popular.

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    Demand and Supply at Work in Labor Markets – Principles of Microeconomics 2e

    DEMAND AND SUPPLY AT WORK IN LABOR MARKETS

    Learning Objectives

    By the end of this section, you will be able to:

    Predict shifts in the demand and supply curves of the labor market

    Explain the impact of new technology on the demand and supply curves of the labor market

    Explain price floors in the labor market such as minimum wage or a living wage

    Markets for labor have demand and supply curves, just like markets for goods. The law of demand applies in labor markets this way: A higher salary or wage—that is, a higher price in the labor market—leads to a decrease in the quantity of labor demanded by employers, while a lower salary or wage leads to an increase in the quantity of labor demanded. The law of supply functions in labor markets, too: A higher price for labor leads to a higher quantity of labor supplied; a lower price leads to a lower quantity supplied.

    Equilibrium in the Labor Market

    In 2015, about 35,000 registered nurses worked in the Minneapolis-St. Paul-Bloomington, Minnesota-Wisconsin metropolitan area, according to the BLS. They worked for a variety of employers: hospitals, doctors’ offices, schools, health clinics, and nursing homes.

    [link] illustrates how demand and supply determine equilibrium in this labor market. The demand and supply schedules in [link] list the quantity supplied and quantity demanded of nurses at different salaries.

    Labor Market Example: Demand and Supply for Nurses in Minneapolis-St. Paul-Bloomington The demand curve (D) of those employers who want to hire nurses intersects with the supply curve (S) of those who are qualified and willing to work as nurses at the equilibrium point (E). The equilibrium salary is $70,000 and the equilibrium quantity is 34,000 nurses. At an above-equilibrium salary of $75,000, quantity supplied increases to 38,000, but the quantity of nurses demanded at the higher pay declines to 33,000. At this above-equilibrium salary, an excess supply or surplus of nurses would exist. At a below-equilibrium salary of $60,000, quantity supplied declines to 27,000, while the quantity demanded at the lower wage increases to 40,000 nurses. At this below-equilibrium salary, excess demand or a shortage exists.

    Demand and Supply of Nurses in Minneapolis-St. Paul-Bloomington

    Annual Salary Quantity Demanded Quantity Supplied

    $55,000 45,000 20,000

    $60,000 40,000 27,000

    $65,000 37,000 31,000

    $70,000 34,000 34,000

    $75,000 33,000 38,000

    $80,000 32,000 41,000

    The horizontal axis shows the quantity of nurses hired. In this example we measure labor by number of workers, but another common way to measure the quantity of labor is by the number of hours worked. The vertical axis shows the price for nurses’ labor—that is, how much they are paid. In the real world, this “price” would be total labor compensation: salary plus benefits. It is not obvious, but benefits are a significant part (as high as 30 percent) of labor compensation. In this example we measure the price of labor by salary on an annual basis, although in other cases we could measure the price of labor by monthly or weekly pay, or even the wage paid per hour. As the salary for nurses rises, the quantity demanded will fall. Some hospitals and nursing homes may reduce the number of nurses they hire, or they may lay off some of their existing nurses, rather than pay them higher salaries. Employers who face higher nurses’ salaries may also try to replace some nursing functions by investing in physical equipment, like computer monitoring and diagnostic systems to monitor patients, or by using lower-paid health care aides to reduce the number of nurses they need.

    As the salary for nurses rises, the quantity supplied will rise. If nurses’ salaries in Minneapolis-St. Paul-Bloomington are higher than in other cities, more nurses will move to Minneapolis-St. Paul-Bloomington to find jobs, more people will be willing to train as nurses, and those currently trained as nurses will be more likely to pursue nursing as a full-time job. In other words, there will be more nurses looking for jobs in the area.

    At equilibrium, the quantity supplied and the quantity demanded are equal. Thus, every employer who wants to hire a nurse at this equilibrium wage can find a willing worker, and every nurse who wants to work at this equilibrium salary can find a job. In [link], the supply curve (S) and demand curve (D) intersect at the equilibrium point (E). The equilibrium quantity of nurses in the Minneapolis-St. Paul-Bloomington area is 34,000, and the equilibrium salary is $70,000 per year. This example simplifies the nursing market by focusing on the “average” nurse. In reality, of course, the market for nurses actually comprises many smaller markets, like markets for nurses with varying degrees of experience and credentials. Many markets contain closely related products that differ in quality. For instance, even a simple product like gasoline comes in regular, premium, and super-premium, each with a different price. Even in such cases, discussing the average price of gasoline, like the average salary for nurses, can still be useful because it reflects what is happening in most of the submarkets.

    Source : opentextbc.ca

    13.1 Demand and Supply at Work in Labor Markets – UH Microeconomics 2019

    13.1 DEMAND AND SUPPLY AT WORK IN LABOR MARKETS

    Learning Objectives

    By the end of this section, you will be able to:

    Predict shifts in the demand and supply curves of the labor market

    Explain the impact of new technology on the demand and supply curves of the labor market

    Explain price floors in the labor market such as minimum wage or a living wage

    Markets for labor have demand and supply curves, just like markets for goods. The law of demand applies in labor markets this way: A higher salary or wage—that is, a higher price in the labor market—leads to a decrease in the quantity of labor demanded by employers, while a lower salary or wage leads to an increase in the quantity of labor demanded. The law of supply functions in labor markets, too: A higher price for labor leads to a higher quantity of labor supplied; a lower price leads to a lower quantity supplied.

    EQUILIBRIUM IN THE LABOR MARKET

    In 2015, about 35,000 registered nurses worked in the Minneapolis-St. Paul-Bloomington, Minnesota-Wisconsin metropolitan area, according to the BLS. They worked for a variety of employers: hospitals, doctors’ offices, schools, health clinics, and nursing homes. Figure 13.2 illustrates how demand and supply determine equilibrium in this labor market. The demand and supply schedules in Table 13.1 list the quantity supplied and quantity demanded of nurses at different salaries.

    Figure 13.2 Labor Market Example: Demand and Supply for Nurses in Minneapolis-St. Paul-Bloomington The demand curve (D) of those employers who want to hire nurses intersects with the supply curve (S) of those who are qualified and willing to work as nurses at the equilibrium point (E). The equilibrium salary is $70,000 and the equilibrium quantity is 34,000 nurses. At an above-equilibrium salary of $75,000, quantity supplied increases to 38,000, but the quantity of nurses demanded at the higher pay declines to 33,000. At this above-equilibrium salary, an excess supply or surplus of nurses would exist. At a below-equilibrium salary of $60,000, quantity supplied declines to 27,000, while the quantity demanded at the lower wage increases to 40,000 nurses. At this below-equilibrium salary, excess demand or a shortage exists.Table 13.1 Demand and Supply of Nurses in Minneapolis-St. Paul-BloomingtonAnnual SalaryQuantity DemandedQuantity Supplied

    $55,000 45,000 20,000 $60,000 40,000 27,000 $65,000 37,000 31,000 $70,000 34,000 34,000 $75,000 33,000 38,000 $80,000 32,000 41,000

    The horizontal axis shows the quantity of nurses hired. In this example we measure labor by number of workers, but another common way to measure the quantity of labor is by the number of hours worked. The vertical axis shows the price for nurses’ labor—that is, how much they are paid. In the real world, this “price” would be total labor compensation: salary plus benefits. It is not obvious, but benefits are a significant part (as high as 30%) of labor compensation. In this example we measure the price of labor by salary on an annual basis, although in other cases we could measure the price of labor by monthly or weekly pay, or even the wage paid per hour. As the salary for nurses rises, the quantity demanded will fall. Some hospitals and nursing homes may reduce the number of nurses they hire, or they may lay off some of their existing nurses, rather than pay them higher salaries. Employers who face higher nurses’ salaries may also try to replace some nursing functions by investing in physical equipment, like computer monitoring and diagnostic systems to monitor patients, or by using lower-paid health care aides to reduce the number of nurses they need.

    As the salary for nurses rises, the quantity supplied will rise. If nurses’ salaries in Minneapolis-St. Paul-Bloomington are higher than in other cities, more nurses will move to Minneapolis-St. Paul-Bloomington to find jobs, more people will be willing to train as nurses, and those currently trained as nurses will be more likely to pursue nursing as a full-time job. In other words, there will be more nurses looking for jobs in the area.

    At equilibrium, the quantity supplied and the quantity demanded are equal. Thus, every employer who wants to hire a nurse at this equilibrium wage can find a willing worker, and every nurse who wants to work at this equilibrium salary can find a job. In Figure 13.2, the supply curve (S) and demand curve (D) intersect at the equilibrium point (E). The equilibrium quantity of nurses in the Minneapolis-St. Paul-Bloomington area is 34,000, and the equilibrium salary is $70,000 per year. This example simplifies the nursing market by focusing on the “average” nurse. In reality, of course, the market for nurses actually comprises many smaller markets, like markets for nurses with varying degrees of experience and credentials. Many markets contain closely related products that differ in quality. For instance, even a simple product like gasoline comes in regular, premium, and super-premium, each with a different price. Even in such cases, discussing the average price of gasoline, like the average salary for nurses, can still be useful because it reflects what is happening in most of the submarkets.

    Source : pressbooks.oer.hawaii.edu

    Econ Chapter 4 Flashcards

    Start studying Econ Chapter 4. Learn vocabulary, terms, and more with flashcards, games, and other study tools.

    Econ Chapter 4

    5.0 3 Reviews

    The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied.

    Click card to see definition 👆

    Price

    Click again to see term 👆

    As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.

    Click card to see definition 👆

    Technology

    Click again to see term 👆

    1/14 Created by thekenzie25

    Terms in this set (14)

    The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied.

    Price

    As the __________ substitute for low-skill labor becomes available, the demand curve for low-skill labor will shift to the left.

    Technology

    Improvements in the productivity of labor will tend to:

    Increase Wages

    If the demand for software engineers __________ slower than does supply, then wages of software engineers will __________.

    Increase; Fall

    In contrast to goods and services markets, _____________ are rare in labor markets, because rules that prevent people from earning income are not politically popular.

    Price Ceilings

    Since Baltimore passed the first _______________ in 1994, several dozen cities enacted similar laws in the late 1990s and into the 2000s.

    Living Wage Law

    Other things being equal, a __________ supply of workers tends to __________ real wages.

    Larger; Decreases

    Many states do have ____________, which impose an upper limit on the interest rate that lenders can charge.

    Usury Laws

    When consumers and businesses have greater confidence that they will be able to repay in the future, _______________________.

    The quantity demanded of financial capital at any given interest rate will shift to the right.

    A straightforward example of a _______________, often used for simplicity, is the interest rate.

    Rate of Return

    Many economists believe that the trend toward greater wage inequality across the U.S. economy was primarily caused by _____________.

    New Technologies

    Steel mill wage costs increase by 18 percent over a year. What is the likely economic effect on the market for steel?

    There is an increase in the cost of producing steel, which shifts the supply curve of steel to the left, thereby increasing the price of steel.

    Refer to Figure 4-1. The movement from __________ to __________ is consistent with a successful advertising campaign that claims wool keeps you warm.

    Point A to Point F

    Refer to Figure 4-1. The movement from __________ to __________ is consistent with a decrease in the price of cotton (a substitute).

    Point A to Point H

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