Chapter 11: Input Markets (Labor) Labor Market Who represents supply? -Workers Who represents demand?

-Employees Wage: Price of Labor (Vertical) Employment: Quantity of Labor (Horizontal) Unemployment: Surplus of Labor (S > D) Labor Vs. Leisure Reservation Wage: the lowest wage for which you are willing to work (always changing) Work more hours? -Substitution Effect -More money = more hours -Less money = less hours -Income Effect -More money = less hours -Less money = more hours -Both effects go through everyones mind -Backward bending individual labor supply (see picture 1) -Labor Market curve is positive all the way through

-Labor Supply Factors: (change willingness to work)

-Demographics -Non-money aspects (quality of job) -Wages in other jobs (substitutes) -Non-wage income (stock market, grandma leaves $) -Demand for a labor is a derived demand: Marginal Revenue Product: Added production from hiring one more worker x product price -Labor Demand Factors: -Demand for goods -Productivity -Prices of other inputs (Substitutes) Labor Market Equilibrium: -Consumer confidence falls (wages come down, jobs lost) (pic 2) -Stock market recovers (increase supply of labor or could shift left) (pic 3) -Immigration laws tighten (supply of labor will fall) Causes of Unemployment: (pic 4) -Sticky wages: wage doesnt change with changes in economy -Efficiency wages: some companies like paying workers more money so they can be more loyal or create prestige (athletes) -Compensating differentials: how are wages set for conditions of the work (beach chair guy vs. sewer cleaner) -Collective bargaining (unions): successful at forcing wages higher than equilibrium Imperfect Labor Markets: -Causes lower employment and lower wages, why? 1. Through Market power: firms produce less and hire fewer people, results in lower wages (monopolistic exploitation)

2. Through Monopsony: firm is the only employer in town or the industry. Pays less than what workers are worth. (Ex. Military or small factory town) (MFC higher than supply curve) (pic 5&6) (monopsonistic exploitation) Chapter A1: Economics of Health Care (pic 7&8) Health Care and the Deficit: Types of Health Care: -Preventative Care: any sort of treatment you do to reduce the risk of illness (you do when your healthy) (physical, vision, & dental) -Specialty Care: any type of treatment that takes place after you are diagnosed with an illness (prescription drugs, E.R. & surgeries) -Elective Care: any treatments that are not necessary for your physical health (laser eye, cosmetic, & fertilization surgeries) Health Demand Factors -Demand (what shifts it): -Age and Population -Income and Wealth -Third-Party Insurance -Socioeconomic Factors (cultural) (football players) -Medical Tourism Supply Factors: -Health Labor Market (number of doctors)