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Intermediate Microeconomics


3. Labor Market Equilibrium


Workers prefer to receive high wages, but employers prefer to pay low wages. Labor markets balance out these competiting forces, which gives rises to an equilibrium wage and an equilibrium quantity of labor that is bought and sold. This topic focuses on the process throught which wages and employment levels are set, how changes in economic conditions alter wages and employment levels and how various government interventions affect competitive labor markets. The policies examined are the following: payroll taxes, employment subsidies, mandated benefits, immigration and minimum wages. In addition, noncompetitive markets, e.g., monopsony and monopolies, are examined.


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Equilibrium in a Competitive Labor Market

This Pencast illustrates an equilibrium in a competitive labor market. It is shown that the competitive equilibrium maximizes social welfare. [Play Pencast]


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Competitive Equilibrium Across Two Labor Markets

This Pencast illustrates how wages converge across regions by showing how wage differences induce migration until the cross-regional wage differences are eliminated. [Play Pencast]


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Payroll Tax Assessed on Firms

This Pencast shows how a payroll tax assessed on firms affects the wage paid to workers, the wage received by workers and the equilibrium level of employment. [Play Pencast]


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Payroll Tax Assess on Workers

This Pencast shows how a payroll tax assessed on workers affects the wage paid to workers, the wage received by workers and the equilibrium level of employment. [Play Pencast]


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Tax Incidence

This Pencast shows how the incidence of a payroll tax depends on the relative elasticities of labor supply and labor demand. [Play Pencast]


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Employment Subsidies

This Pencast demonstrates how a per-unit subsidy paid to employers affects the wage paid to workers, the effective wage paid by employers, and the equilibrium level of employment. [Play Pencast]


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Mandated Benefits

This Pencast demonstrates how a mandated benefit affects equilibrium wage and employment levels. It is assumed that the provision of the benefit is costly to firms but that workers value the benefit. [Play Pencast]


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Short-Run Impact of Immigration

This Pencast demonstrates how immigration affects the equilibrium wage and employment of natives. Two examples are provided, one in which natives and immigrates are perfect substitutes and another in which natives and immigrants are complements. [Play Pencast]


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Long-Run Effects of Immigration

This Pencast depicts how an influx of immigrants affects the equilbirium wages and employment levels of natives in the long run. [Play Pencast]


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Cobweb Model

This Pencast presents the Cobweb model, which depicts a labor market that adjusts gradually to changes in the demand for and supply of particular types of labor. [Play Pencast]


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Minimum Wage

This Pencast shows the effects of a minimum wage in a competitive labor market. In addition, the possible effects of a minimum wage on the uncovered sector are explored. [Play Pencast]


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Perfectly Discriminating Monopsony

This Pencast describes and illustrates how a perfectly discriminating monopsonist determines wage and employment levels. [Play Pencast]


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Non-Discriminating Monopsonist

This Pencast depicts the equilibrium wage and employment levels when a monopsonist is unable to perfectly discriminate, i.e. a situation in which the firm must pay all workers the same wage. [Play Pencast]


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Minimumn Wage and Monopsony

This Pencast illustrates that the implementation of a minimum wage in a labor market controlled by a monopsonist raises the equilibrium wage and level of employment. [Play Pencast]


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Hiring and Wage Decisions by a Monopolist

This Pencast examines how a monopoly, a firm that is the sole seller of a good, chooses its optimal level of employment and the wage that such a firm pays to its workers. [Play Pencast]


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