...Running Header: Market Equilibration Process Paper Labor Demand and Supply Economics ECO/561 April 21, 2011 Running Header: Market Equilibration Process Paper Introduction The purpose of this paper is to relate the concepts of the market equilibrating process to a prior real-world experience occurring in a free market. The market equilibrating process will be explained and the following components will be considered in the explanation; Law of demand and the determinants of demand, law of supply and the determinants of supply, labor demand and supply. Law of Demand and the Determinants of Demand According to Economics: Principles, problems, and politics, a fundamental characteristic of demand is this: Other things equal, as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls. In short, there is a negative or inverse relationship between price and quantity demanded. Economists call this inverse relationship the law of demand and the determinants are the “other things equal” in the relationship between price and quantity demanded (McConnell, Brue and Flynn, 2009). Law of Supply and the Determinants of Supply According to Economics: Principles, problems, and politics, the law of supply states that as price rises, the quantity supplied rises; as price falls, the quantity supplied falls and the basic determinants of supply are, resource prices, technology, taxes and subsidies, prices of other goods, producer expectations, and the number...
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...SUPPLY AND DEMAND OF LABOR XECO/212 04/20/2012 Jason Mackey Looking back into the U.S. history and certain things that happened throughout the economical history of this country we can see some extreme changes in the economic make up of the country. In the 1930’s the country suffered from a devastating economic failure called the great depression. What happened during this time is the stock market took a major hit and basically put the country into an economical tail spin. People all across the country lost millions of dollars which caused the demand for all kinds of products and services to drop significantly. At the same time this caused a extreme overstock of services and goods. What occurred next is many people became unemployed because their trade or product was not considered needed. This unfortunate time in history caused people to lose their jobs at an extreme level. This had a chain reaction on the economy that many did not see coming. When one job was lost, this had a cascading affect on the entire business world. At a point in time people thought they could travel out west to find jobs when this was not the case the catastrophe had an impact on the entire country. When people have no money to buy things and no way of supporting themselves bad things begin to happen. People begin losing their homes and starvation can set in and before you know it the entire country is devastated. During the great depression labor supply and demand played a major role on everything...
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...money. Demand for goods and services decreased because people had less money to spend. Because of this, the market equilibrium was decreased and there became an excess of goods and services. Usually when there is an excess of goods and services we would see prices drop because of competition, therefore the demand for goods and services would increase. This time however, there was such an increase in goods and services that people started losing their jobs because they were no longer needed to produce goods or provide services. This is not a conventional way of looking at the way the economy operates. During the depression, people did not have any money to spend because they didn’t have jobs to earn an income. During the worst, or lowest, point of the depression, approximately 25% of all workers were unemployed. Additionally, 37% of nonfarm workers did not have jobs. People did not have money to eat and also some could not keep their property because they could not afford it. It was a time of economic hardship and despair for numerous people throughout the entire country. During the great depression people tried to save money in every way that they possibly could. People were not interested in borrowing money from banks because of the fear they would not be able to pay it back even though banks had lowered their interests rates. The Great Depression affected nearly everyone and practically every aspect of the economy. Michelle, H. (2006). The laws of supply and demand, classical...
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...John McGee Tracey Mariner September 9, 2011 CheckPoint: Historical Example of Labor Supply and Demand In this assignment, I was asked to chose a historic event and describe the event in terms of labor supply and demand. The historic event I chose was the Great Depression. This era spanned for 1929 thru 1939. Not only was the Great Depression happening there was also World War II. The great depression was a time in America where the demand for labor was higher than supply. The Law of Supply was the more the wages were for labor the more people would want to work. The Law of Demand was the higher the pay; employers would hire fewer employees. This was not the case during the great depression, the Law of Supply showed that the lower the wages went, the fewer the employees. During the great depression the main problems were that, employers were not hiring because their business were not doing good and the decline in goods being bought and sold. During this time, goods were not being bought because there was such a high unemployment rate and people just did not have the money to buy the goods that these companies were developed. Towards the end of the war, America was heading for a change and businessmen started to rebuild/build plants. This created jobs for the unemployed and slowly began the process of moving forward. During this time there was a great demand for planes, tanks, and boats, which allow for even more employment opportunities. Once again,...
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...Checkpoint: Historical Example of Labor Supply and Demand Desiree Brownell XECO 212 2/15/2013 I chose to do my supply and demand response addressing the great depression. The great depression was a worldwide economic depression that started around 1929 and continued until about 1939. So far the great depression was and is the longest and most widespread depression that America has ever seen. During this particular point in history the demand for labor was higher than the demand for supply. America went through huge layoffs, employees were working for less, and companies where not hiring anymore. On October 29, 1929 the stock market crashed and there was billions of dollars lost by large businesses. The day the stock market crashed is still considered one of the defining factors and many hardships of the great depression. The impact on supply and demand of labor on one sector of the labor market- One of the biggest impacts of the supply and demand sector of the labor market was unemployment. 25 percent of all workers and 37 percent of all nonfarm workers were completely out of work. Employers were no longer hiring and could not afford to keep as many employees. Businesses where declining, therefore they were unable to pay as many employees wages and could not hire either. The factors that affected the labor demand and labor supply in the great depression where as I mentioned before unemployment, stock market crash, businesses no longer hiring, and employees were working...
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...Checkpoint: Historical Example of Labor Supply and Demand Aaron Rhome XECO/212 11/17/12 Jim Vernon Checkpoint: Historical Example of Labor Supply and Demand The era of American history known as the Great Depression represents the bleakest chapter in the history of the economy United States. A series of events culminated into the largest economic downturn in known history, with no end in sight. Following the stock market crash on September 3, 1929 millions of Americans rushed their banks to withdrawal their funds before their bank collapsed. Their actions caused many more banks to fail and limited the availability of credit to businesses. This lack of credit combined with reduced consumer spending lowered the demand for labor and unemployment skyrocketed as a result. At the outset of the depression domestic and foreign demand for automobiles had turned American auto manufacturing was the biggest industry in the world and was the driving force behind the U.S. economy (McCarthy, 2012). As thousands of banks and other companies closed or slowed production unemployment levels skyrocketed to a height of 25% by 1933 (Croft Communications, 2012). The increased supply of available labor coincided with a decrease in demand for automobiles resulting in a labor equilibrium that required fewer workers and lowered wages. According to McCarty (2012), “During the early 1930s, hundreds of thousands of workers...
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...Labor is one of the most influential factors in today’s global market. Cost and availability of labor directly affect the supplier or producer’s ability to manufacture their products. When a producer wants to sell a product in the market they first have to go through the production process and produce the actual product. This is where labor comes in; labor is defined as the work that is produced by human beings and to produce and sell a product, employees are needed. The more a producer plans to produce and sell, the more employees and labor they need. Supply and demand of labor rely on the perceived demand of the product that is being sold, as demand for the product increases, the demand for labor (employees) increases to be able to produce the products. This means that an...
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...When supply and demand are in balance, the economy is said to be in equilibrium between price and quantity. This is a very simple principle but is it actually a “law” and is it completely true? When we examine specific instances of goods and services against a particular demand, we see that this behavior seems to hold true and so where could there be a problem with this model? Let’s examine the supply side first. This is the component that provides the goods and services, so effectively this is the element that brings things to “market” for which the consumer or demand side reacts. One of the big items considered on the supply side is the cost of labor. “…as wages rise, the supply of goods and services is reduced, because wages are the input price of labor. Labor accounts for about two-thirds of all input costs, and thus wage increases create supply reductions …” (Introduction to Economic Analysis, McAfee) No doubt, this all makes sense and probably sounds like a statement of the obvious. However, let’s examine the demand side of this relationship. What is it? Where is it? How does it manifest? Here’s where we encounter the problem with this model. There is no independent demand side of the equation. Demand is based on the consumption of the goods and services provided by the supply side, but the means by which this demand is met requires trade in exchange for the item(s) involved. In modern times that trade is through the use of money (or credit). So...
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...AND LABOR ECONOMICS Insert name Insert institution Insert course Insert date Abstract Labor economics comprises the study of the factors affecting workers. Since all divisions of economics involve workers, it is prudent to evaluate their influence on labor economics and labor market for that matter. Consumption directly affects the supply of labor. If the workers experience an increase in their desire for consumption in relation to leisure, the labor supply curve will shift outwards. The workers will supply more labor at every given wage. The effect of public finance on labor economics may be through government taxation on the workers. If income taxes increase, workers will likely substitute leisure for consumption and supply less labor. Any effects on the supply and demand for labor will ultimately affect the labor market thus are essential in labor economics. Distribution of income may also affect the labor market especially if the distribution is unequal. Inequality in the distribution of income will affect workers and thus affect labor supply. Production of goods and services on the other hand determine the supply and demand for labor. Such effects directly influence the labor market. Table of Contents Abstract 2 Table of Contents 3 Introduction 4 Effect of consumption on the labor market 4 Effect of income distribution on the labor market 5 Effect of exchange on the labor market 6 Effect of production of goods and services on the labor market...
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...PRE-TEST – ANSWER KEY Econ 361, 1st Hourly Prof. Khan Mohabbat 1. The broadest measure of the aggregate price level is the a) GDP deflator.* b) consumer price index. c) producer price index. d) d. gross domestic product. 2. If the value of a price index was 125 for 2005 and 75 for 1982, and GDP was 2500 in 2005 compared to 600 in 1982, the value of real 2005 GDP in terms of 1982 prices is a) 1500.* b) 1000. c) 2500. d) 360. 3. The index that measures the change in price of a typical basket of consumer goods is a) the GDP deflator. b) the consumer price index.* c) nominal GDP. d) real GDP. 4. Personal income equals personal disposable income plus a) payroll taxes. b) transfer payments. c) dividend payments. d) personal saving. e) personal taxes.* 5. If real GDP exceeds potential GDP, this means that a) output is below the level produced at the benchmark rate for high employment and high rate of resource utilization. b) this cannot occur; the economy can never be at a point where real GDP exceeds potential GDP. c) cyclical output is above what the economy can sustain in the long-run.* d) the economy is expanding. 6. In the base year, the relationship between nominal and real GDP is a) uncertain. b) one of equality.* c) real GDP is higher. d) nominal GDP is higher. 1 7. Gross domestic product includes a) all intermediate and final goods and services produced. b) the current production of final goods and services with a country’s borders.* c) exchanges of assets. d) the...
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...objectives. These external factors might include supply and demand,labor market, political social and unemployment rate. Example of external factors are: 2.1.1 Supply And Demand The availability of manpower both within and outside the company is an important determinant in the recruitment process. If the company has a demand for more professionals and there is limited supply in the market for the professionals demanded by the company, then the company will have to depend upon internal sources by providing them special training and development programs. Supply and demand is perhaps one of the most fundamental concepts of economics and it is the backbone of a market economy. Demand refers to how much quantity of a product or service is desired by buyers. Supply represents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price. 2.1.2 Labor Market A labor market is the place where workers and employees interact with each other. A labor market is the place where workers and employees interact with each other. In the labor market, employers compete to hire the best, and the workers compete for the best satisfying job. A labor market in an economy functions with demand and supply of labor. In this market, labor demand is the firm's demand for labor and supply is the worker's supply of labor. The supply and demand of labor in the market is influenced by changes in the...
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...1. Derived demand refers to a. demand curves derived from utility functions b. an individual demand curve estimated from a market demand curve c. a market demand curve estimated from individual demand curves d. demand for a resource derived from the demand for the product produced by that resource 2. Economic rent is defined as a. the opportunity cost of a resource b. the payment to a resource in excess of its opportunity cost c. opportunity cost d. total earnings 3. A resource's marginal product is a. the revenue produced by one additional unit of that resource, other things constant b. the total output produced by one unit of that resource, other things constant c. the additional output produced by one additional unit of that resource, other things constant d. the total output divided by the number of units of that resource employed 4. In a perfectly competitive labor market, a profit-maximizing firm will hire labor up to the point at which the a. wage rate = MRC b. wage rate < MRP c. wage rate = MRP d. wage rate > MRP 5. The demand for labor is likely to increase when a. the supply of the good it produces falls b. the demand for the good it produces rises c. the supply of the good it produces rises d. the demand for the good it produces falls 6. Leisure is a. subject to the...
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...unit of labor, the increase in a firm's total revenues is known as the marginal: A) utility product. B) revenue product. C) product. D) cost. 2. Assume Ajax Company employs 100 workers and total revenue is $400,000. When Ajax Company employs 101 workers, total revenue is $405,000. The marginal revenue product of the 101st workers is: A) $5 thousand. B) None of the answers. C) $40 thousand. D) $405 thousand. 3. Assume consumer demand for CD-ROMs increases. The result is a (an): A) increase in the marginal revenue product of firms in the CD-ROM industry. B) rightward shift in the market demand for labor curve in the CD-ROM industry. C) all of the answers. D) None of the answers. E) increase in derived demand for workers in the CD-ROM industry. 4. Which of the following statements concerning the supply of labor is true? A) None of the answers. B) The supply of labor is determined by the prevailing wage rate. C) The wage rate has no effect on the supply of labor. D) The labor supply curve is downward sloping. 5. One reason the supply of carpenters is greater than the supply of physicians is because: A) physicians do not belong to a union. B) carpenters demand less income. C) None of the answers. D) carpenters belong to unions. 6. Suppose a change in technology increases the marginal product of labor. The result is a (an): A) None of the answers. B) downward movement along the demand for labor curve. ...
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... 8e (Case/Fair) Chapter 10: Input Demand: The Labor and Land Markets Input Markets: Basic Concepts Multiple Choice 1) The idea that the demand for autoworkers stems from the demand for automobiles is A) the value of the marginal product of autoworkers. B) derived demand. C) indirect demand. D) output demand. Answer: B Diff: 3 Type: C 2) A decrease in the wage rate will change A) only the amount of labor hired. B) the amount of labor employed, and it may also change the amount of other inputs employed. C) the price the firm charges for the product, but it will not affect the demand for any of the inputs. D) the firm's profit-maximizing level output, but not its usage of inputs. Answer: B Diff: 1 Type: F 3) When a large amount of output is produced per unit of the input, the input is said to exhibit A) high productivity. B) low productivity. C) marginal productivity. D) derived productivity. Answer: A Diff: 1 Type: F 4) The demand for _________ is a "derived demand." A) ice cream cones on a hot day B) tax-free municipal bonds C) a hair stylist by a salon owner D) a birthday cake for your brother Answer: C Diff: 3 Type: C 5) The demand for inputs is a derived demand because A) it does not come...
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...on the supply and demand of labor on one sector of the labor market? The impact on supply and demand was critical in the Luddite revolt. It all begins in 1779 when the failure of a Bill to regulate the frame-knitting industry had resulted in 300 frames being smashed and thrown into the streets. This is where the shortage of the supply begins. Then, by 1810 the Orders in Council and a change in fashion had led to deterioration in the standard of craftsmanship required in stocking making and a consequent cheapening of the trade. It was the attempt to intimidate some masters who brought in the new machines that caused Nottingham stocking knitters to smash the machines. (http://www.victorianweb.org/history/riots/luddites.html) Then the impact on the demand of Stocking knitting became predominantly a domestic industry, the stockier renting his frame from the Master and working in his own 'shop' using thread given to him by the Master; the finished items were handed back to the Master to sell. The frames were therefore scattered round the villages; this cause the demand to increase it then became easy for the Luddites to smash a frame and then disappear. Between March 1811 and February 1812 the supply of frames had been affected. About a thousand machines at the cost of between 6,000 and 10,000 were smashed. This had a damaging impact on the supply and demand (http://www.victorianweb.org/history/riots/luddites.html) Explain the factors that affected labor demand and labor...
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