ECON 480 - LABOR ECON CH 1-3

Labor economics

The study of how workers firms and governments interact in labor markets.

Labor supply curve

Shows how the amount of labor workers offer changes with the wage.

Derived demand

Demand for labor that comes from consumer demand for the goods and services workers produce.

Labor demand curve

Shows how many workers firms want to hire at different wage rates.

Equilibrium

The wage and employment level where labor supply equals labor demand.

Model

A simplified representation of reality used to explain behavior and make predictions.

Positive economics

Examines factual and testable questions about what happens or will happen.

Normative economics

Examines what should happen and therefore involves value judgments.

Econometrics

The application of statistical methods to economic data.

Regression analysis

A statistical method for estimating the relationship between variables.

Dependent variable

The outcome the regression is trying to explain or predict.

Independent variable

A variable used to explain changes in the dependent variable.

Regression coefficients

Numbers measuring how the dependent variable changes when an independent variable changes.

Scatter diagram

A graph plotting observations for two variables to show their relationship.

Regression line

The line that best summarizes the relationship between variables in a dataset.

Standard error

A measure of the precision or uncertainty of an estimated regression coefficient.

t statistic

A coefficient divided by its standard error and used to evaluate statistical significance.

Statistical significance

Evidence that an estimated relationship is unlikely to be caused solely by random sampling variation.

R² or R-squared

The proportion of variation in the dependent variable explained by the regression.

Multiple regression

A regression containing more than one independent variable.