Macro Economics: Employment and Unemployment

These flashcards cover key vocabulary and concepts related to employment and unemployment as discussed in the lecture.

Potential Workers

Everyone in the general population except children under 16 years, active military personnel, and institutionalized people.

Employed

Individuals who hold full-time or part-time paid jobs.

Unemployed

Individuals who do not have a paid job and are actively searching for one.

Not in Labor Force

Individuals without a job and not actively searching for one.

Labor Force

The sum of employed and unemployed individuals.

Unemployment Rate

The percentage of the labor force that is unemployed; calculated as (Unemployed/Labor Force) x 100%.

Labor Force Participation Rate

The percentage of potential workers that are in the labor force; calculated as (Labor Force/Potential Workers) x 100%.

Marginal Benefit

The additional benefit gained from hiring one more worker, equal to the value of the marginal product of labor.

Marginal Cost

The additional cost incurred from hiring one more worker, typically equal to the wage paid.

Frictional Unemployment

Unemployment that occurs when job seekers are looking for the right job.

Structural Unemployment

Unemployment that occurs when there are mismatches between worker skills and job requirements.

Labor Demand Curve

A curve that shows the relationship between the quantity of labor demanded and the wage; slopes downward due to diminishing marginal returns.

Labor Supply Curve

A curve that shows the relationship between the quantity of labor supplied and the wage; slopes upward as higher wages incentivize more work hours.

What is the labor demand curve?

The labor demand curve shows the relationship between the quantity of labor demanded by employers and the wage rate.

Factors that shift the labor demand curve

The labor demand curve can shift due to changes in labor productivity, changes in the demand for the final product, technological advancements, and changes in the number of firms in the market.

How does an increase in productivity shift the labor demand curve?

An increase in productivity typically shifts the labor demand curve to the right, indicating that employers are willing to hire more workers at each wage rate.

What effect does a decrease in the price of the final product have on the labor demand curve?

A decrease in the price of the final product usually shifts the labor demand curve to the left, reducing the quantity of labor demanded by employers.

What role does technology play in shifting the labor demand curve?

Technological advancements can shift the labor demand curve to the right if they enhance productivity or create new job opportunities.

How does the number of firms in a market affect labor demand?

An increase in the number of firms willing to hire increases the overall demand for labor, shifting the labor demand curve to the right.

What is equilibrium in the labor market?

Equilibrium in the labor market is the point where the quantity of labor supplied equals the quantity of labor demanded at a given wage rate.

How is the equilibrium wage determined?

The equilibrium wage is determined by the intersection of the labor supply and labor demand curves.

What happens when there is a labor surplus?

When there is a labor surplus, unemployment occurs as the quantity of labor supplied exceeds the quantity of labor demanded.

What happens when there is a labor shortage?

When there is a labor shortage, employers may raise wages to attract more workers, moving the market toward equilibrium.

What factors can disrupt labor market equilibrium?

Factors such as minimum wage laws, labor unions, or changes in demand and supply can disrupt the equilibrium in the labor market.

What is the role of wage flexibility in achieving equilibrium?

Wage flexibility allows wages to adjust in response to surpluses or shortages, helping the labor market move toward equilibrium.