Noncompetitive Factor Markets

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Presentation transcript:

Noncompetitive Factor Markets L21 Noncompetitive Factor Markets

3 questions Market power on goods market and demand for labor Buyers Market Power: Labor Market

Competitive Demand

Equilibrium: Competitive Model

Monopoly Demand

Equilibrium in LM w/p y

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

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

Monopsony

Monopsony: Secret of Happiness

Monopsony: Optimal Choice

Minimal Wage Rate

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

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