In this lesson, our instructor Jibin Park gives an introduction on labor supply and cost minimization. He discusses work vs. leisure, substitution effect, income effect, the labor supply curve, capital vs. labor, and theories of income distribution.
In a “backward-bending labor supply curve,” individuals at first work more hours when wage increases, but cut back on hours at higher wages to consume more work rather than leisure.
The labor supply curve shifts because of changes in preferences, population, opportunities and wealth.
The cost-minimization rule is where MPL/Wage = MPK/Rental Rate – you employ more workers if MPL/Wage is higher. You employ more capital if MPL/Capital is higher!
Marginal productive and wage equality, market power, efficiency wages and discrimination are among reasons why individuals have varying levels of income.
Labor Supply & Cost Minimization
Lecture Slides are screen-captured images of important points in the lecture. Students can download and print out these lecture slide images to do practice problems as well as take notes while watching the lecture.
This book created a 5-step plan to help you study more effectively, use your preparation time wisely, and get your best score. This book includes two full-length practice exams modeled on the real test, all the terms and concepts you need to know to get your best score, and your choice of three customized study schedules.
This book includes an in-depth preparation for both AP economics exams. It features two full-length practice tests, one in Microeconomics and one in Macroeconomics, and all test questions answered and explained. It also features a detailed review of all test topics, which include: supply and demand, theory of consumer choice, economics in the public sector, costs, perfect and imperfect competition, monopolies, labor resources, game theory, the national income and gross domestic product, inflation and unemployment, fiscal policy, money and banking, monetary policy, economic growth, international trade and exchange, interest rate determination, and the market for loanable funds.