Noncompetitive Factor Markets

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Presentation transcript:

Noncompetitive Factor Markets L21 Noncompetitive Factor Markets

2 questions Impact of market power in goods market on labor market Market Power in labor market

SOH (Monopoly)

Labor Demand

Equilibrium

Equilibrium, General Elasticity

Monopoly and LM Increasing Labor by 1 gives less than MPL of revenue Monopoly demands less labor The reduction of employment depends on elasticity Monopoly and minimal wage rate?

Monopsony Market power on “buyers” side Most important monopsony: Labor market Monopsony and minimal wage rate

Monopsony

SOH (Monopsony):

Monopsony: Optimal Choice

Minimal Wage Rate

Minimal Wage rate: Monopsony Increases Labor in equilibrium Increases wage in equilibrium Restores efficiency