平狄克微观经济学Markets for Factor Inputs

Chapter14MarketsforFactorInputs©2005PearsonEducation,Inc.TopicstobeDiscussed CompetitiveFactorMarkets EquilibriuminaCompetitiveFactorMarket FactorMarketswithMonopsonyPower FactorMarketswithMonopolyPowerChapter142©2005PearsonEducation,Inc.CompetitiveFactorMarkets Characteristics Largenumberofsellersofthefactorofproduction Largenumberofbuyersofthefactorofproduction ThebuyersandsellersofthefactorofproductionarepricetakersChapter142©2005PearsonEducation,Inc.CompetitiveFactorMarkets Demandforafactorinputwhenonlyoneinputisvariable: Factordemandsarederiveddemand Demandforaninputthatdependson,andisderivedfrom,boththefirm’slevelofoutputandthecostofinputs DemandforcomputerprogrammersisderivedfromhowmuchsoftwareMicrosoftexpectstosellChapter142©2005PearsonEducation,Inc.FactorInputDemand–OneVariableInput Assumefirmproducesoutputusingtwoinputs: Capital(K)andLabor(L) Hiredatpricesr(rentalcostofcapital)andw(wagerate) Kisfixed(shortrunanalysis)andLisvariable FirmmustdecidehowmuchlabortohireChapter142©2005PearsonEducation,Inc.2©2005PearsonEducation,Inc.2©2005PearsonEducation,Inc.FactorInputDemand–OneVariableInput MRPListheadditionaloutputobtainedfromanadditionalunitoflabor,multipliedbytheadditionalrevenuefromanextraunitofoutput AdditionaloutputisgivenbyMPLandadditionalrevenueisMRChapter14©2005PearsonEducation,Inc.FactorInputDemand–OneVariableInputChapter142©2005PearsonEducation,Inc.FactorInputDemand–OneVariableInput Inacompetitivemarket,MR=P Thismeans,foracompetitivemarket Graphically,diminishingmarginalreturns,MPLfallsasLincreasesChapter142©2005PearsonEducation,Inc.MarginalRevenueProductHoursofWorkWages($perhour)Chapter142©2005PearsonEducation,Inc.FactorInputDemand–OneVariableInput Choosingtheprofit-maximizingamountoflabor: IfMRPL>w(themarginalcostofhiringaworker):hiretheworker IfMRPL<w:hirelesslabor IfMRPL=w:profitmaximizingamountoflaborChapter142©2005PearsonEducation,Inc.Inacompetitivelabormarket,afirmfacesaperfectlyelasticsupplyoflaborandcanhireasmanyworkersasitwantsatw*.HiringbyaFirmintheLaborMarketQuantityofLaborPriceofLaborTheprofitmaximizingfirmwillhireL*unitsoflaboratthepointwherethemarginalrevenueproductoflaborisequaltothewagerate.Chapter14©2005PearsonEducation,Inc.FactorInputDemand–OneVariableInput Quantityoflabordemandchangesinresponsetothewagerate Ifthemarketsupplyoflaborincreasesrelativetodemand(babyboomersorfemaleentry),asurplusoflaborwillexistandthewageratewillfallChapter142©2005PearsonEducation,Inc.AShiftintheSupplyofLaborQuantityofLaborPriceofLaborChapter14©2005PearsonEducation,Inc.FactorInputDemand–OneVariableInput ComparingInputandOutputMarketsChapter142©2005PearsonEducation,Inc.FactorInputDemand–OneVariableInput Boththehiringandoutputchoicesofthefirmfollowthesamerule Inputsoroutputsarechosensothatmarginalrevenuefromthesaleofoutputisequaltomarginalcostfromthepurchaseofinputs TrueforbothcompetitiveandnoncompetitivemarketsChapter142©2005PearsonEducation,Inc.FactorInputDemand–ManyInputs Inchoosingmorethanonevariableinput,achangeinthepriceofoneinputchangesthedemandfortheothers Scenario Producingfarmequipmentwithtwovariableinputs: Labor Assembly-linemachineryChapter142©2005PearsonEducation,Inc.FactorInputDemand–ManyInputs Ifthewageratefalls: Morelaborwillbedemandedevenifamountofmachinerydoesnotchange MCofproducingfarmequipmentfalls Profitableforfirmtoincreaseoutput Willinvestinadditionalmachinerytoexpandproduction MRPLwillshiftright,quantityoflabordemandedincreasesChapter142©2005PearsonEducation,Inc.FactorInputDemand–ManyInputs Ifwagerateis$20/hr,firmhires100workerhours–pointA Wageratefallsto$15/hr MRPL>W,firmdemandsmorelabor MRPL1isdemandforlaborw/machineryfixed IncreasedlaborcausesMPKtorise,encouragingthefirmtorentmoremachinery MPLincreases MRPLcurveshiftsright,firmuses140hrslaborChapter14©2005PearsonEducation,Inc.FactorInputDemand–ManyInputsWhenthewageratefallsto$15,theMRPcurveshifts,generatinganewpointConthefirm’sdemandforlaborcurve.ThusAandCareonthedemandforlaborcurve,butBisnot.Chapter14©2005PearsonEducation,Inc.MarketDemandCurve Allfirms’demandforlaborvarysubstantially Assumethatallfirmsrespondtoalowerwage Allfirmswouldhiremoreworkers Marketsupplywouldincrease Themarketpricewillfall ThequantitydemandedforlaborbythefirmwillbesmallerChapter14©2005PearsonEducation,Inc.IndustryDemandforLaborLabor(worker-hours)Labor(worker-hours)Wage($perhour)Wage($perhour)05101505101550100150L0L2120L1FirmIndustryChapter14©2005PearsonEducation,Inc.TheIndustryDemandforLabor Ifthewageratefallsforallfirmsinindustry,allfirmswilldemandmorelabor Moreindustryoutputandsupplyforoutputwillrise,causingpricestofall Theincreaseinlaborissmallerthaniftheproductpricewerefixed AddingalllabordemandcurvesinallindustriesgivesmarketdemandcurveforlaborChapter14©2005PearsonEducation,Inc.TheDemandforJetFuel Jetfuelisafactor(input)forairlines Costofjetfuel 1971–Jetfuelcostequaled12.4%oftotaloperatingcost 1980–Jetfuelcostequaled30.0%oftotaloperatingcost 1990’s–Jetfuelcostequaled15.0%oftotaloperatingcostChapter14©2005PearsonEducation,Inc.TheDemandforJetFuel Airlinesrespondedtohigherpricesinthe1970’sbyreducingthequantityofjetfuelused Outputofairlines(ton-miles)increasedby29.6%andjetfuelconsumedroseby8.8% EffectofincreasedfuelcostsonairlinesdependsonabilitytocutfuelusagebyreducingweightChapter14©2005PearsonEducation,Inc.TheDemandforJetFuel Priceelasticityofdemandforjetfueldependsonabilitytoconservefuelandelasticitiesofdemandandsupplyoftravel Thedemandforjetfuelimpactstheairlinesandrefineriesalike Theshort-runpriceelasticityofdemandforjetfuelisveryinelasticChapter14©2005PearsonEducation,Inc.Short-RunPriceElasticityofDemandforJetFuelAmerican -0.06 Delta -0.15Continental -0.09 TWA -0.10Northwest -0.07 United -0.10Airline Elasticity Airline ElasticityChapter14©2005PearsonEducation,Inc.TheDemandforJetFuel Thereisnogoodsubstituteforjetfuel Longrunelasticityofdemandishigher,however,becauseairlinescaneventuallyintroducemoreenergy-efficientairplanes Canshowshort-andlong-rundemandsforjetfuel MRPSRismuchlesselasticthanlongrundemandsinceittakestimetosubstituteChapter14©2005PearsonEducation,Inc.TheShort-andLong-RunDemandforJetFuelQuantityofJetFuelPriceChapter14©2005PearsonEducation,Inc.TheSupplyofInputstoaFirm Inacompetitivemarket,afirmcanpurchaseasmuchofaninputitwantsatthemarketprice Determinedbysupply/demandofinputmarket Inputsupplytoafirmisperfectlyelastic FirmissmallpartofmarketsodoesnotaffectmarketpriceChapter142©2005PearsonEducation,Inc.AFirm’sInputSupplyinaCompetitiveFactorMarketYardsofFabric(thousands)YardsofFabric(thousands)Price($peryard)Price($peryard)Chapter14©2005PearsonEducation,Inc.TheSupplyofInputstoaFirm Rememberthatthesupplycurveistheaverageexpenditurecurve Supplycurverepresentingthepriceperunitthatthefirmpaysforagood Also,marginalexpenditurecurverepresentsthefirm’sexpendituresonanadditionalunitthatitbuys AnalogoustoMRcurveinoutputmarketChapter14©2005PearsonEducation,Inc.TheSupplyofInputstoaFirm Whenfactormarketiscompetitive,averageexpenditureandmarginalexpenditureareidenticalhorizontallines Howmuchoftheinputshouldthefirmpurchase? AslongasMRP>ME,profitcanbeincreasedbybuyingmoreinput WhenMRP<ME,benefitslowerthancostsChapter14©2005PearsonEducation,Inc.TheSupplyofInputstoaFirm ProfitmaximizationrequiresthemarginalexpendituretobeequaltothemarginalrevenueproductME=MRP AspecialcaseofcompetitiveoutputmarketshowsprofitmaximizationwhereME=wChapter14©2005PearsonEducation,Inc.TheMarketSupplyofInputs Themarketsupplyforfactorinputsisupwardsloping Examples:jetfuel,fabric,steel ThemarketsupplyforlabormaybeupwardslopingandbackwardbendingChapter14©2005PearsonEducation,Inc.TheSupplyofInputstoaFirm TheSupplyofLabor Thechoicetosupplylaborisbasedonutilitymaximization Leisurecompeteswithincomeforutility Wageratemeasuresthepriceofleisure HigherwageratecausesthepriceofleisuretoincreaseChapter14©2005PearsonEducation,Inc.TheMarketSupplyofInputs TheSupplyofLabor Higherwagesencourageworkerstosubstituteworkforleisure Thesubstitutioneffect Higherwagesallowtheworkertopurchasemoregoods,includingleisure,whichreducesworkhours TheincomeeffectChapter14©2005PearsonEducation,Inc.CompetitiveFactorMarkets TheSupplyofLabor Iftheincomeeffectexceedsthesubstitutioneffect,thesupplycurveisbackwardbending Byusingutilityandbudgetlinegraph,wecanshowhowthesupplycurvecanbebackwardbending CanshowhowtheincomeeffectcanexceedthesubstitutioneffectChapter14©2005PearsonEducation,Inc.SubstitutionandIncomeEffectsofWageIncreaseWorkerinitiallychoosespointA: 16hoursleisure,8hourwork Income=$80Wageincreasesto$30.NewbudgetlineRQ. 19hoursleisure,5hourswork Income=$150Incomeeffectoverridessubstitutioneffect©2005PearsonEducation,Inc.Backward-BendingSupplyofLaborHoursofWorkperDayWage($perhour)Chapter14©2005PearsonEducation,Inc.LaborSupplyforOne-andTwo-EarnerHouseholds Intwentiethcentury,thepercentoffemalesinlaborforcehasincreased 1950–34% 2001–60% Comparedtheworkchoicesof94unmarriedfemaleswithworkdecisionsofheadsofhouseholdsandspousesin397families CandescribeworkdecisionsbycalculatingelasticityofsupplyforlaborChapter14©2005PearsonEducation,Inc.ElasticitiesofLaborSupply(HoursWorked)Chapter14©2005PearsonEducation,Inc.LaborSupplyforOne-andTwo-EarnerHouseholds Whenhigherwagerateleadstofewerhoursworked: Laborsupplycurveisbackwardbending Incomeeffectoutweighsthesubstitutioneffect ElasticityoflaborsupplyisnegativeChapter14©2005PearsonEducation,Inc.EquilibriuminaCompetitiveFactorMarket Competitivefactormarketisinequilibriumwhentheprevailingpriceequatesquantitysuppliedandquantitydemanded Sinceworkersarewellinformed,allreceivethesamewageandgenerateidenticalMRPLwhenemployedChapter14©2005PearsonEducation,Inc.EquilibriuminaCompetitiveFactorMarket Ifoutputmarketisperfectlycompetitive,demandcurveforaninputmeasuresbenefitconsumersplaceonuseofinputinproductionprocess Wageratealsoreflectsthecostofthefirmandtosocietyofusingadditionalunitofinput Atequilibrium,MBL=MCL=wageChapter14©2005PearsonEducation,Inc.EquilibriuminaCompetitiveFactorMarket Whenoutputandinputmarketsarebothperfectlycompetitive,resourcesareusedefficiently MaximizeTB–TC EfficiencyrequiresthatMRPLequalsthebenefittoconsumersoftheadditionaloutput,givenby(P)(MPL)Chapter14©2005PearsonEducation,Inc.EquilibriuminaCompetitiveFactorMarket Ifoutputmarketisnotcompetitive: MRPL=(P)(MPL)nolongerholds (P)(MPL)>MRPL Atequilibriumnumberofworkers,marginalcosttofirm,wM,islessthanmarginalbenefittoconsumers,vM Althoughthefirmmaximizesprofits,outputisbelowefficientlevelanduseslessthanefficientlevelofoutputChapter14©2005PearsonEducation,Inc.EquilibriuminaCompetitiveFactorMarket Ifoutputmarketisnotcompetitive: Althoughthefirmmaximizesprofits,outputisbelowefficientlevelanduseslessthanefficientlevelofinput Economicefficiencywouldbeincreasedifmorelaborerswerehiredandmoreoutputwereproduced Gainstoconsumerswouldoutweighfirm’slostprofitChapter14©2005PearsonEducation,Inc.LaborMarketEquilibriumNumberofWorkersNumberofWorkersWageWageCompetitiveOutputMarketMonopolisticOutputMarketChapter14©2005PearsonEducation,Inc.EquilibriuminaCompetitiveFactorMarket EconomicRent Forafactormarket,economicrentisthedifferencebetweenthepaymentsmadetoafactorofproductionandtheminimumamountthatmustbespenttoobtaintheuseofthatfactor TheeconomicrentassociatedwiththeemploymentoflaboristheexcessofwagespaidabovetheminimumamountneededtohireworkersChapter14©2005PearsonEducation,Inc.EconomicRentNumberofWorkersWage0Chapter14©2005PearsonEducation,Inc.EquilibriuminaCompetitiveFactorMarket Land:APerfectlyInelasticSupply Occurswhenlandforhousingoragricultureisfixed,atleastinshortrun Itspriceisdeterminedentirelybydemand Whendemandincreases,rentalvalueperunitincreasesandtotallandrentincreasesChapter14©2005PearsonEducation,Inc.EconomicRentLandRentNumberofAcresPrice($peracre)Whendemandincreases,priceandeconomicrentincrease.Chapter14©2005PearsonEducation,Inc.PayintheMilitary DuringtheCivilWar,90%ofthearmedforceswereunskilledworkersinvolvedingroundcombat Today,only16%areunskilledworkersinvolvedingroundcombat LeadtosevereshortagesinskilledworkersChapter14©2005PearsonEducation,Inc.PayintheMilitary Rankstructurehasstayedthesame Payincreasesaredeterminedprimarilybyyearsofservice Similarly,officerswithdifferingskilllevelsareoftenpaidsimilarsalaries ManyskilledworkersleavethearmysincesalariesinprivatesectoraremuchhigherChapter14©2005PearsonEducation,Inc.TheShortageofSkilledMilitaryPersonnelNumberofSkilledWorkersWageChapter14©2005PearsonEducation,Inc.PayintheMilitary Solution Selectivereenlistmentbonusestargetedatskilledjobswherethereareshortages Withincreasesindemandforskilledmilitaryjobs,weshouldexpectthemilitarytoincreasereenlistmentbonusesandothermarketbasedincentivesChapter14©2005PearsonEducation,Inc.FactorMarketswithMonopsonyPower Weshowedbeforethatmanyfirmshavemonopsonybuyingpower USautomobilecompaniesasbuyersofpartsandcomponents Assume Theoutputmarketisperfectlycompetitive InputmarketispuremonopsonyChapter14©2005PearsonEducation,Inc.FactorMarketswithMonopsonyPower MarginalandAverageExpenditure Whenchoosingtopurchaseagood,increaseamountpurchaseduntilthemarginalvalueequalsmarginalexpenditure PricepaidforgoodisaverageexpenditureandisequaltomarginalexpenditureChapter14©2005PearsonEducation,Inc.FactorMarketswithMonopsonyPower Sinceamonopsonistpaysthesamepriceforeachunit,thesupplycurveistheaverageexpenditurecurve Upwardsloping,sincedecidingtobuyanextraunitraisespriceitmustpayforallunits Forprofitmaximizingfirm,marginalexpenditurecurveliesabovetheaverageexpenditurecurve Firmmustpayallunitsthehigherprice,notjustlastunithiredChapter14©2005PearsonEducation,Inc.MarginalandAverageExpenditureUnitsofInputPrice(perunitofinput)01234655101520 HireswhereME=MRP LCiscompetitivemarketlevel©2005PearsonEducation,Inc.FactorMarketswithMonopsonyPower ExamplesofMonopsonyPower Government Soldiers Missiles B2Bombers NASA Astronauts CompanytownChapter14©2005PearsonEducation,Inc.MonopsonyPowerintheMarketforBaseballPlayers Baseballownersoperateamonopsonisticcartel Reserveclausepreventedcompetitionforplayers Eachplayertiedtooneteamforlife Oncedrafted,couldnotplayforanotherteamunlessrightsweresold BaseballownershadmonopsonypowerinnegotiatingnewcontractsChapter14©2005PearsonEducation,Inc.MonopsonyPowerintheMarketforBaseballPlayers During1960’sand70’s,players’salarieswerefarbelowmarketvalueofMP Ifcompetitivemarket Playersreceiving$42,000in1969wouldhaveinsteadreceivedasalaryof$300,000in1969dollars Strikein1972followedbylawsuitChapter14©2005PearsonEducation,Inc.MonopsonyPowerintheMarketforBaseballPlayers In1975,playerscouldbecomefreeagentsafterplayingforateamforsixyears Reserveclausenolongerineffect Marketbecamemorecompetitive From1975to1980,expendituresonplayer’scontractswentfrom25%ofteamexpendituresto40% AverageplayersalarydoubledinrealtermsChapter14©2005PearsonEducation,Inc.FactorMarketswithMonopolyPower Justasbuyersofinputscanhavemonopsonypower,sellersofinputscanhavemonopolypower ThemostimportantexampleofmonopolypowerinfactormarketsinvolveslaborunionsChapter14©2005PearsonEducation,Inc. Demandwithnomonopsonypower. Supplyofunionlaborw/nomonopolypower. LabormarketcompetitivewithL*workershiredatwagew* DemandequalsSupplyMonopolyPowerofSellersofLaborNumberofWorkersWageperworkerChapter14©2005PearsonEducation,Inc.MonopolyPowerofSellersofLabor Theunion’smonopolypowerallowsittochooseanywagerateandquantitysupplied Ifitwantedtomaximizenumberofworkershired,itwouldchoosecompetitiveoutcome Ifitwantedtoobtainhigherwages,itwouldrestrictmembershiptoL1workerstogethigherwagew1 Thosewhofindjobsarebetteroff.Thosewithoutjobsareworseoff.Chapter14©2005PearsonEducation,Inc. LabormarketcompetitivewithL*workershiredatwagew* LaborsellerswithmonopolypoweratL1andw1MonopolyPowerofSellersofLaborNumberofWorkersWageperworkerChapter14©2005PearsonEducation,Inc.MonopolyPowerofSellersofLabor Isrestrictiveunionworthwhile? Yes,ifmaximizingeconomicrentisthegoal Theunionactslikeamonopolistrestrictingoutputtomaximizeprofits Rentforaunionrepresentsthewagesearnedinexcessofopportunitycost UnionmustchooseworkerssothatthemarginalcostequalsthemarginalrevenueChapter14©2005PearsonEducation,Inc.MonopolyPowerofSellersofLabor Costisthemarginalopportunitycostsinceitisameasureofwhatanemployerhastoofferanadditionalworkertogethimorhertoworkforthefirm But,thewagenecessarytoencourageadditionalworkerstotakejobsisgivenbysupplycurveforlabor,SLChapter14©2005PearsonEducation,Inc.MonopolyPowerofSellersofLabor RentmaximizingcombinationofwagerateandnumberofworkersiswhereMRcrossessupply Pricecomesfromthedemandcurve ThisgivesacombinationofL1andw1 ShadedareabelowthedemandcurveandabovethesupplycurvetotheleftofL1istheeconomicrentthatallworkersreceiveChapter14©2005PearsonEducation,Inc.MonopolyPowerofSellersofLaborNumberofWorkersWageperworkerMaximizingrentstoworkersmeanschoosinglaborwhereMRcrossesS.Wagecomesfromdemand.Chapter14©2005PearsonEducation,Inc.FactorMarketswithMonopolyPower Rentmaximizingpolicycanhelpnonunionworkersiftheycanfindnonunionjobs Ifjobsarenotavailable,thiscouldcausetoomuchofadistinctionbetweenwinnersandlosers Lookingbackatgraph,analternativeobjectiveistomaximizeaggregatewagesthatallunionmembersreceive ThisgivesL2andw2Chapter14©2005PearsonEducation,Inc.UnionizedandNon-UnionizedWorkers Whenunionusesmonopolypower,someworkersarenothired.Thoseworkerseithertrytofindnonunionjobsorchooseinitiallynottojoinunion. Assumethetotalsupplyofworkersisfixed–supplyisSL DemandforunionizedlaborisDUanddemandfornon-unionizedlaborisDNU TotalmarketdemandisDU+DNU=DLChapter14©2005PearsonEducation,Inc.UnionizedandNon-UnionizedWorkers Whatifunionchoosestoraisewageabovecompetitivewagew*,towU? NumberofworkershiredbytheunionfallsbyamountLU Astheseworkersfindemploymentinnon-unionsector,wagerateinthatsectoradjustsuntillabormarketisinequilibrium Atnewwagerate,wNU,additionalnumbershiredinsectorisLNU EqualsnumberofworkerswholeftunionizedsectorChapter14©2005PearsonEducation,Inc.WageDiscriminationinLaborMarketNumberofWorkersWageperworkerWhenamonopolisticunionraisesthewagerateintheunionizedsectoroftheeconomyfromw*towU,employmentinthatsectorfalls.Forthetotalsupplyoflabortoremainunchanged,thewageinthenon-unionizedsectormustfallfromw*towNU©2005PearsonEducation,Inc.TheDeclineofPrivateSectorUnionism Observations Unionmembershipandmonopolypowerhasbeendeclining Initially,duringthe1970’s,unionwagesrelativetonon-unionwagesfellChapter14©2005PearsonEducation,Inc.TheDeclineofPrivateSectorUnionism Observations Inthe1980’s,unionwagesstabilizedrelativetonon-unionwages Sincethe1990’s,membershiphasbeenfallingandwagedifferentialhasremainedstableChapter14©2005PearsonEducation,Inc.TheDeclineofPrivateSectorUnionism Explanation Theunionshavebeenattemptingtomaximizetheindividualwagerateinsteadoftotalwagespaid ThedemandforunionizedemployeeshasprobablybecomeincreasinglyelasticasfirmsfinditeasiertosubstitutecapitalforskilledlaborChapter14©2005PearsonEducation,Inc.WageInequality–HaveComputersChangedtheLaborMarket? 1950-1980 Relativewageofcollegegraduatestohighschoolgraduateshardlychanged 1980-1995 TherelativewagegrewrapidlyChapter14©2005PearsonEducation,Inc.WageInequality–HaveComputersChangedtheLaborMarket? In1984,25.1%ofallworkersusedcomputers 1993–45.8% 2001–53.5% Formanagersandprofessionals,itwasover80%Chapter14©2005PearsonEducation,Inc.WageInequality–HaveComputersChangedtheLaborMarket? Percentchangeinuseofcomputers Collegedegrees 1984-1993:from42%to82% Lessthanhighschooldegree 11%:from5%to16% Withhighschooldegree 21%:from19%to40%Cha