1. Introduction to Labor Economics
Chapter 1

2. The study of labor economics requires a solid foundation in microeconomics.
Review material may be found at:

3. Microeconomics background
The study of labor economics requires a solid foundation in microeconomics
Review material may be found at

4. Labor market vs. other markets
labor services are rented, not sold,

5. Labor market vs. other markets
labor services are rented, not sold,
labor productivity is affected by pay and working conditions,

6. Labor market vs. other markets
labor services are rented, not sold,
labor productivity is affected by pay and working conditions, and
the suppliers of labor care about the way in which the labor is used.

7. Positive vs. Normative Economics
Positive economics - an attempt to describe how the economy operates using the scientific method.

8. Positive vs. Normative Economics
Positive economics - an attempt to describe how the economy operates using the scientific method.
Normative economics - relies on value judgments to evaluate the overall functioning of the economy.

9. Positive economics
abstraction

10. Positive economics
abstraction
ceteris paribus assumption

11. Positive economics abstraction ceteris paribus assumption
test of model based on predictions, not assumptions

12. Fundamental positive economic concepts
scarcity

13. Fundamental positive economic concepts
scarcity
rational self-interest

14. Fundamental positive economic concepts
scarcity
rational self-interest
utility maximization

15. Fundamental positive economic concepts
scarcity
rational self-interest
utility maximization
profit maximization

16. Normative economics
interpersonal comparisons of utility are impossible

17. Normative economics
interpersonal comparisons of utility are impossible
Pareto improvement

18. Normative economics
interpersonal comparisons of utility are impossible
Pareto improvement
Pareto efficiency (aka Pareto optimality)

19. Normative economics
interpersonal comparisons of utility are impossible
Pareto improvement
Pareto efficiency (aka Pareto optimality)
problems with the Pareto optimality criterion

20. Markets and Pareto optimality
under ideal conditions, markets result in Pareto efficient outcomes

21. Types of Market failure
imperfect information,

22. Types of Market failure
imperfect information,
transaction barriers,

23. Types of Market failure
imperfect information,
transaction barriers,
price distortions,

24. Types of Market failure
imperfect information,
transaction barriers,
price distortions,
the nonexistence of markets when externalities are present,

25. Types of Market failure
imperfect information,
transaction barriers,
price distortions,
the nonexistence of markets when externalities are present,
public goods,

26. Types of Market failure
imperfect information,
transaction barriers,
price distortions,
the nonexistence of markets when externalities are present,
public goods, and
capital market imperfections.

27. Equity vs. Efficiency
Attempts to make market outcomes more equitable often results in the loss of economic efficiency.