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Lectures in Macroeconomics- Charles W. Upton Short Run Labor Demand
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Labor Supply and Demand D S H* w*
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Short Run Labor Demand More people reach working age D S H* w* S’ H’ w’
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Short Run Labor Demand More people reach working age D S H* w* S’ H’ w’ The wage rate falls Total hours worked rise Hours per worker fall
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Short Run Labor Demand An Alternative View D S H* w*
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Short Run Labor Demand An Alternative View D S H* w* Y = AK L 1-
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Short Run Labor Demand An Alternative View D S H* w* Y = AK L 1-
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Short Run Labor Demand An Alternative View D S H* w* Y = AK L 1- There is a fixed demand for output. Knowing A, K and Y, we know L
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Short Run Labor Demand An Alternative View D S H* w* Y=C+I+G No change in C, I or G = No change in D
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Short Run Labor Demand An Alternative View D S H* w* Ergo, no change in total hours worked, just more workers working fewer hours
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Short Run Labor Demand An Alternative View D S H* w* Ergo, no change in hours worked, just more workers working fewer hours There is a problem here
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Short Run Labor Demand Labor Supply and Demand D S H* w*
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Short Run Labor Demand Labor Supply and Demand D S H* w*
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Short Run Labor Demand Labor Supply and Demand D S H* w* Firms want to hire the workers. A combination of lower wages and increased output does the job.
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Short Run Labor Demand Labor Supply and Demand D S H* w* So where is the extra demand Firms want to hire the workers. A combination of lower wages and increased output does the job.
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Short Run Labor Demand Labor Supply and Demand D S H* w* So where is the extra demand Firms want to hire the workers. A combination of lower wages and increased output does the job. As GDP rises, Income rises. That means more consumption, more investment, etc
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Short Run Labor Demand Say’s Law Jean Baptiste Say –“Supply Creates its own Demand”
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Short Run Labor Demand Does Say’s Law Work In time yes, absolutely. –There is controversy over whether it works immediately.
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Short Run Labor Demand Does Say’s Law Work In time yes, absolutely. –There is controversy over whether it works immediately. We will assume Say’s Law here. –But, we shall return.
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Short Run Labor Demand More people reach working age D S H* w* S’ H’ w’
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Short Run Labor Demand More people reach working age D S H* w* S’ H’ w’ If you wish, think of this as a short run labor demand curve
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Short Run Labor Demand More people reach working age D S H* w* S’ H’ w’ If you wish, think of this as a short run labor demand curve Possible, but remember our query “Does it fit the facts”?
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Short Run Labor Demand More people reach working age D S H* w* S’ H’ w’ If you wish, think of this as a short run labor demand curve Possible, but remember our query “Does it fit the facts”? More interesting to work with short run labor supply
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Short Run Labor Demand More people reach working age D S H* w* S’ H’ w’ If you wish, think of this as a short run labor demand curve Possible, but remember our query “Does it fit the facts”? More interesting to work with short run labor supply The Principle of Parsimony
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Short Run Labor Demand End ©2004 Charles W. Upton. All rights reserved
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