The economics of labor market - Assignment Example

1) When real income (or purchasing power increases), we consume more of all normal goods and leisure is a normal good. This means work less. There will be a negative income effect whenever the budget constraint indicates an increase in purchasing power – whenever the budget constraint has shifted outward.2) Unearned income reduces labor earning and will likely force worker out of work force in search of better pay.unearned income also demotivate the worker and have no urge to work.3) The trend for the last four decades have seen entry of more women into the work force and this has been triggered by increased perception and empowerment of the women that but family responsibility equally on men and women.

(Kaufman and Hotchkiss, 2006)4) Substitution effect-as the wage paid to worker increase thi increase opportunity cost of labour. By consuming leisure you are forgoing the wage you could have earned by working that hour.as the wage increases leisure get more expensive and you consume less leisure. That is as the wage increase you work more hoursIncome effect- leisure is a normal good as you get wealthier you’ll want to consume more leisure. As the wage you receive increase you become wealthier and thus will want to consume more leisure.

Thus as the real wage increase you work fewer hours5) hire another worker as long as the worker adds at least $1 to profits or hire another worker as long as the cost of that worker (his wage) is less than or equal to the value of that worker’s extra output.6) Technological advances decrease demand for labor Anything that changes either the amount of output workers can produce or the price of that output will shift the labor demand curve. Fishers, for example, would be more productive if they were provided with better training, more equipment, or improved technology, so all of these things would tend to increase the demand for them7) As new machines are invented and used in firms more people are likely to loose jobs because one machine take up work for many people with one operator and machine is also efficient.

ReferencesBruce E. Kaufman and Julie L. Hotchkiss. The Economics of Labor Markets. Thomson/South-Western, 2006