Module 5.4 Labor Market Equilibrium Lecture

What does the x-axis represent in the supply of labor graph?

The quantity of labor (in jobs or hours).

What does the y-axis represent in the supply of labor graph?

The price of labor (wages).

Why does the demand curve for labor slope downward?

Employers want to hire more workers at lower wages due to cost-cutting desires.

What does the upward sloping supply curve indicate?

More labor is supplied at higher wages because higher pay attracts more workers.

What happens at the intersection of labor demand and supply?

It results in market equilibrium, where the willingness to pay for labor equals the willingness to accept wages.

What are the equilibrium wage and employment symbolized as?

Equilibrium wage as w (w star)* and equilibrium employment as e (e star)*.

What occurs if demand for labor increases?

The demand for workers shifts to the right, leading to increased equilibrium employment and wages.

What is the impact of welfare programs on labor supply?

Welfare programs can reduce labor supply as more appealing outside options lead individuals to choose leisure over work.

What is the effect of providing financial support on individuals' work hours?

It encourages individuals to work fewer hours or not enter the workforce at all due to the income effect.

How do public assistance programs affect equilibrium wages and employment levels?

They can increase wages employers must pay while reducing the equilibrium employment level.

What is essential to accurately evaluate policy impacts in the labor market?

An understanding of supply and demand dynamics.