by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Supply and Demand in Financial Markets?In any market, the price is what suppliers receive and what demanders pay. In financial markets, those who supply financial capital through saving expect to receive a rate of return, while those who demand financial...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a Bilateral Monopoly in a Labor Market?What happens when there is market power on both sides of the labor market, in other words, when a union meets a monopsony? Economists call such a situation a bilateral monopoly.Employment, L*, will be lower in a bilateral...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Labor Market Power of Employees?A labor union is an organization of workers that negotiates with employers over wages and working conditions. A labor union seeks to change the balance of power between employers and workers by requiring employers to deal...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the marginal Cost of Labor?The marginal cost of labor is the cost to the firm of hiring one more worker. However, here is the thing: we assume that the firm is determining how many workers to hire in total. They are not hiring sequentially. There are a couple...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How do Employers Have Labor Market Power? How does market power by an employer affect labor market outcomes? Intuitively, one might think that wages will be lower than in a competitive labor market. Let’s prove it. We will tell the story for a monopsonist, but the...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a Monopsony? A competitive labor market is one where there are many potential employers for a given type of worker, say a secretary or an accountant. Suppose there is only one employer in a labor market. Because that employer has no direct competition in...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Imperfect Competition in Labor Markets?There are probably more examples of perfectly competitive labor markets than perfectly competitive product markets, but that doesn’t mean that all labor markets are competitive.When a job applicant is bargaining with an...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Labor Demand in Perfectly Competitive Markets?The question for any firm is how much labor to hire.We can define a Perfectly Competitive Labor Market as one where firms can hire all the labor they wish at the...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How does a Minimum Wage act as a Price Floor in the Labor Market?In contrast to goods and services markets, price ceilings are rare in labor markets, because rules that prevent people from earning income are not politically popular. There is one exception: boards of...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How does Technology affects Demand for Labor? Economic events can change the equilibrium salary (or wage) and quantity of labor. Consider how the wave of new information technologies, like computer and telecommunications networks, has affected low-skill and high-skill...
