1. Chapter 8: Labor Markets
Contemporary Economics: An Applications Approach By Robert J. Carbaugh 1st Edition
Chapter 8:
Labor Markets

2. Market for apple pickers
Labor Market Equilibrium
Market for apple pickers S0
Wage ($ per week) A D0
Carbaugh, Chap. 8

3. A firm’s demand schedule for labor
Labor Market Equilibrium
A firm’s demand schedule for labor
Labor demand curve
Labor demand schedule
Labor Total Marginal Product Value of
input product Product Price Marginal
(workers (boxes per (boxes per Product
per week) week) week)
0 0
$10 $900
Wage ($ per week) A
Demand = value of the marginal product
Carbaugh, Chap. 8

4. Changes in the market supply & demand for labor
Labor Market Equilibrium
Changes in the market supply & demand for labor
Increased supply of labor
Increased demand for labor S0
Wage ($ per week)
Wage ($ per week) S0 B S1 A A B D1 D0 D0
Carbaugh, Chap. 8

5. Effects of a minimum wage
Labor Market Equilibrium
Effects of a minimum wage
Higher wages cause job losses
Shock effect moderates job losses
Wage rate ($ per hour)
Market surplus S0
Wage rate ($ per hour) S0 B C B D
Wage floor
Wage floor A A
Job losers
New entrants who cannot find jobs
Kept jobs
Job losers D1 D0 D0
Carbaugh, Chap. 8

6. Union methods to increase wages
Labor Unions
Union methods to increase wages
Increase the demand for labor
Decrease the supply of labor S1 S0 S0
Wage rate ($ per hour)
Wage rate ($ per hour) B B A A D1 D0 D0
Carbaugh, Chap. 8

7. Effects of an industrial union
Labor Unions
Effects of an industrial union
Unionized market (Ford, GM, DaimlerChrysler)
Non-unionized market (Honda)
Wage rate ($ per hour)
Wage rate ($ per hour)
Market surplus S0 S0 S1 B C
Wage floor A A B D0 D0
Carbaugh, Chap. 8

8. Import competition and domestic workers
Impact of Trade and Immigration
Import competition and domestic workers S0
Wage rate ($ per hour) C B
Wage floor A D D1 D0
Carbaugh, Chap. 8

9. Effects of labor migration from Mexico to the US
Impact of Trade and Immigration
Effects of labor migration from Mexico to the US
United States
Mexico
SUS
SUS'
SMexico'
SMexico
Wage rate ($ per day)
Wage rate ($ per day) A B B A D0 D0 7 7
Carbaugh, Chap. 8