Markets FACTOR

Write This Down Factors Market Factors Market - where factors of production are sold (labor = common example)

Factor Market Businesses sell Products Household buy Products Up until now we have focused on the Product Market

Factor Market Businesses buy Labor Households sell Labor Businesses sell Products Household buy Products Now we will learn about the Resource Market

Write This Down Factors Market Factors Market - where factors of production are sold (labor = common example)

Factors Market - where factors of production are sold (labor = common example) SLabor Quantity (# of workers) Labor Market DLabor W Q Wage Supply of labor = #ppl who want the job Demand of labor = #workers company wants to hire Wages are determined by supply & demand of labor

2 ways to interfere with wages: Wages are determined by supply & demand of labor 2 ways to interfere with wages: 1. Government interference Minimum wages cause unemployment wages is an costs S they can’t afford as many workers

Minimum Wage: a price floor on wages Factor Market Price Controls Minimum Wage: a price floor on wages SLabor DLabor Wage W1 Quantity of workers Q1 Minimum wage (or Union Agreement) W2 Q2

Minimum Wage: a price floor on wages Factor Market Price Controls Minimum Wage: a price floor on wages Wage SLabor W2 Minimum wage (or Union Agreement) W1 DLabor Qd < Qs Quantity of workers Firms want to hire less than the number who want to work

Minimum Wage: a price floor on wages Factor Market Price Controls Minimum Wage: a price floor on wages Wage SLabor Surplus W2 Minimum wage (or Union Agreement) W1 DLabor Qd < Qs Quantity of workers Surplus means firms are firing workers = unemployment

2 ways to interfere with wages: Wages are determined by supply & demand of labor 2 ways to interfere with wages: 1. Government interference Minimum wages cause unemployment wages is an costs S they can’t afford as many workers 2. Union interference Collective Bargaining – union officials negotiate with employer Strike – refusing to work Picket – parade carrying signs Boycott – mass refusal to buy products

Unemployment Types of Unemployment Boycott – mass refusal to buy products Unemployment Definition – people available (want) to work & looked for work, but didn’t find work or worked less than 1hr for pay Types of Unemployment 1. Cyclical – due to swings in business cycle

Normal Business Cycle

Unemployment Types of Unemployment Boycott – mass refusal to buy products Unemployment Definition – people available (want) to work & looked for work, but didn’t find work or worked less than 1hr for pay Types of Unemployment 1. Cyclical – due to swings in business cycle 2. Frictional - people inbetween jobs (like changing jobs/waiting for new one to start) 3. Seasonal - caused by annual changes in conditions like weather or holidays

Frictional Unemployment

Unemployment Types of Unemployment Boycott – mass refusal to buy products Unemployment Definition – people available (want) to work & looked for work, but didn’t find work or worked less than 1hr for pay Types of Unemployment 1. Cyclical – due to swings in business cycle 2. Frictional - people inbetween jobs (like changing jobs/waiting for new one to start) 3. Seasonal - caused by annual changes in conditions like weather or holidays

2. Frictional - people inbetween jobs (like changing jobs/waiting for new one to start) 3. Seasonal - caused by annual changes in conditions like weather or holidays 4. Structural - caused by change in economy that reduces demand for some workers – often from innovation in technology. (like horses to cars)

2. Frictional - people in between jobs (like changing jobs/waiting for new one to start) 3. Seasonal - caused by annual changes in conditions like weather or holidays 4. Structural - caused by change in economy that reduces demand for some workers – often from innovation in technology. (like horses to cars) Anyone need more time?