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Producers: Labor Markets

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Presentation on theme: "Producers: Labor Markets"— Presentation transcript:

1 Producers: Labor Markets

2 Labor supply (consumers)

3 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

4 MPL (interpretation)

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

6 Short run: Demand for Labor

7 Labor Market: Equilibrium

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

9 Labor Market: Equilibrium
Technology Preferences

10 Labor Market: Minimal Wage

11 Long run ( not fixed) We choose simultaneously and

12 Long run

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

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