Producers: Labor Markets

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Presentation transcript:

Producers: Labor Markets

Labor supply (consumers)

Producers Producers: have a technology Technology given by production function Two inputs: Capital and Labor Example MPL and MPK (decreasing) Short and Long run (fixed K or not) Returns to Scale

MPL (interpretation)

Short Run (fixed K) Profit maximization Price taking Example (Short run)

Short run: Demand for Labor

Labor Market: Equilibrium

Labor Market: Equilibrium Capital change A) B) C) D)

Labor Market: Equilibrium Technology Preferences

Labor Market: Minimal Wage

Long run ( not fixed) We choose simultaneously and

Long run

Profit Maximization and IRS Suppose that are optimal What can we say about at ? Profit maximization not always well defined

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