Lesson Plan - Resource Markets
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I. Focus will be on labor markets but the discussion can be
generalized to other factors of production.
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II. Why do individuals supply labor?
- labor as a consumption good
- - labor as an investment good
- - an individual's supply of labor curve
- labor vs. leisure
- - shape of the supply curve
- impact of wage rates
- substitution effect
- - income effect
- - backward bending supply of labor
- - the market's supply of labor curve
- can the market supply curve be backward bending?
- - what affects market labor supply?
- general impacts
- - focus on the education of the labor
- why invest in education?
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III. Why do firms demand labor?
- labor as a production resource/firms as profit maximizers
- - demand for labor is derived from the demand for the final output
- - definitions
- marginal revenue product of labor
- - value of the marginal product of labor
- - what is a firm's demand for labor? (MRPL)
- - what affects a firm's demand for labor?
- shifts in the demand curve
- - price (wage) elasticity of the demand for labor
- - market demand for labor
- - marginal factor cost
IV. Equilibrium wages and employment in different markets
- Two markets matter
- the market for the input (the labor market)
- perfectly competitive vs. monopsony
- - what is a monopsony?
- - the market for the output (the goods/services market)
- perfectly competitive vs. monopoly
- - equilbrium wages and employment
- firms always hire labor where MRP = MFC. why?
- - perfectly competitive labor market; perfectly competitive output market
- - perfectly competitive labor market; monopoly output market
- monopoly exploitation
- - monopsony labor market; perfectly competitive output market
- monopsony exploitation
- - monopsony labor market; monopoly output market