The maximum allowable scholarship is equal to the cost of attendance at member institutions.
College athletes earn money from ticket sales, TV and radio contracts, and the sales of souvenirs.
A premium woman basketball player will eventually play professionally in the Women's National Basketball association.
Premium players make an average of $241,000 per year for their school, or six times the maximum annual pay.
The revenue contribution of a premier player is the largest.
Male college athletes have larger revenue contributions.
The Distribution of Income, page 716 explains why wages are generated by competition.
The effects of government policies should be described.
MyLab Economics helps you master each occupation and level of human capital.
The market for labor is one of the factors of production.
Labor income is the most important source of income for most people, and is responsible for about three-fourths of pro duction costs.
We use a model of demand and supply to see how wages are determined and why they differ between college graduates and high school graduates, men and women, and people in different occupations.
We look at recent changes in the distribution of income and the effects of government tax and transfer policies on poverty.
Demand and supply curves can be used to show how wages are determined and how changes in the labor market affect wages and employment.
The product is the first thing we start with.
The demand for labor and other productive inputs is different from the demand for consumer products.
It is determined by the demand for the products that workers produce.
The price of consumer products and the demand for them determine the demand for labor.
Consider a firm that makes rubber balls.
The firm takes the price of its output and the price of its inputs as given, because it is perfectly competitive.
Because it only hires a small amount of workers in the labor market, it can hire as many workers as it wants.
The firm takes the price of the rubber balls it makes into account.
The price of rubber balls is $0.50.
Consider the firm's hiring decision in the short run, which is defined as the period during which at least one input cannot be changed.
The firm's hiring decision can be explained by two of the key principles of economics.
The marginal principle should be recalled.
If the marginal benefit exceeds the marginal cost, increase the level of the activity.
The marginal benefit is equal to the marginal cost.
The marginal cost of labor is the same as the marginal benefit of labor.
The marginal cost of labor is equal to the hourly wage if it is hired as many workers as it wants.
The marginal cost of one more hour of labor is $8 if the wage is $8 per hour.
The marginal benefit is the monetary value of the balls produced with an additional hour of labor.
The marginal benefit associated with different quantities of labor is shown in the table.
The relationship between the number of workers and the amount of balls produced is shown in the first two columns.
The principle of diminishing returns should be recalled.
At a decreasing rate, output will increase.
The change in output from one additional unit of labor to the first few workers usually increases.
We'll assume diminishing returns begin with the second worker.
The mar ginal product of labor decreases as the number of workers increases, from 26 for the first worker to 24 for the second worker, and so on.
Figure 32.1 shows the marginal-revenue product curve.
The marginal-cost curve is the labor-supply curve faced by the firm.
It wouldn't make sense to hire another worker because the additional revenue from the sixth worker would be less than the cost of that worker.
The relationship between the wage and the quantity of labor demanded in the wage and the quantity of labor short run is shown in a curve.
The demand curve demanded over the short run, when the answer to the question: At each wage, how many workers does the firm want can be found.
The marginal principle and the firm's demand for labor are used to determine the number of workers the firm should have.
The marginal-revenue product curve is the firm's short-run demand curve for labor.
The labor-demand curve is drawn from the price of output and productivity of workers.
The labor-demand curve is shifted to the right by an increase in the price of balls.
Seven workers are hired by the firm instead of five.
The demand curve will be shifted to the left by a decrease in price or labor productivity.
The labor demands of all the firms that use a particular type of labor are added to draw the short-run market demand curve.
We simply divide the number of firms by the amount of labor demanded by the typical firm in the simplest case.
The market demand for labor would be 500 workers if there were 100 firms and each hired five workers at a wage of $8.
The market demand would be 300 workers if the firm hired three workers at a wage of $11.
The market demand for a consumer good is the same technique we use for nonidentical firms.
We draw individual demand curves and then sum them to get the market demand curve.
For each wage, we add up the labor demands of all the firms to get the aggregate demand.
The marginal revenue product at each quantity of workers is shifted to the right by an increase in the price of output.
Market demand and firms can modify their production facilities, even though there are no diminishing returns in the long run.
Firms will pass on at least part of the higher labor cost to their consumers if the wage is increased.
Firms will quantity of output produced according to the law of demand.
The quantity of labor can be changed to substitute other inputs.
It may not be wise to demand an increase in use of machinery in the ball factory at a wage of $4, but at a wage of $20 it may be wise to use more machinery and less labor.
The labor input per unit of output is decreased by this substitution.
The input-substitution effect reduces labor input per unit of output.
The market demand curve is negatively sloped because the two effects are in the same direction.
We can travel from a developed country like the United States, Canada, France, Germany, or Japan to a less developed country like South America, Africa, or Asia.
The less developed M32_OSUL5592_09_GE_C32.indd 706 tends to be more labor intensive.
In other words, labor is less expensive than other inputs, so it is replaced with machinery and equipment.
Firms in the U.S. use huge earth- moving equipment to mine for minerals, while firms in less developed countries use thousands of workers digging by hand.
Firms in developed countries make furniture with machinery and equipment, while firms in less developed countries make furniture by hand.
Some accountants in less developed countries use simple cal culators and ledger paper, while accountants in developed countries use computers and software.
Firms can't leave the market and can't modify their production facilities in the short run.
In the short run, the demand for labor is less elastic.
The short-run demand curve is more steep than the long-run demand curve.
In the chapter on perfect competition, we used the same logic to explain why the short-run supply curve for a product was higher than the long-run supply curve for the product.
Two types of players are not allowed to change teams, and the limited competition for their services means that they earn relatively low salaries.
The average salary in Major League Basebal (MLB) single team cannot be changed in 2011.
People are willing to pay 17 percent more for a journeyman winner and a player who increases the team's salary.
A player with a high percentage to Exercise 1.7.
The hours worked are what we are referring to when we talk about a labor market.
The city of Florence might have a shortage of nurses.
We need to think about how many nurses are in the city and how many hours they work.
Let's begin with an individual's decision about how long to work.
Each hour of work reduces leisure time by an hour.
The supply of labor is related to the demand for leisure.
The hourly wage is sacrificed for each hour of leisure time.
There are two effects of an increase in the price of a good, a substitution effect and an income effect.
The price of leisure can be affected by an increase in the wage.
The change in leisure time is caused by entertainment.
For every hour of leisure time she takes, she loses 1 hour of work time, a change in the wage and her income goes down.
She doesn't have as much money compared to the price of other goods.
If the wage is $8 per hour, each hour of leisure decreases the amount of income available to spend on consumer goods by $8.
When the wage increases to $10, she will sacrifice more income and consumer goods for each hour of leisure she takes.
She will demand less leisure because of the sacrifice of consumer goods.
She will make more money for consumer goods.
She will substitute income and consumer goods for leisure time as the wage increases.
The demand for leisure increases as real income increases from a change in real income caused by a change in leisure time.
An increase in the wage increases her real income because she changes in the wage.
It is possible to divide 100 hours per week between work and leisure.
She works 36 hours and has 64 hours of leisure.
She makes $360 per hour and spends it on consumer goods.
She can have more leisure time and consumer goods if her wage increases to fifteen dollars.
If she worked only 30 hours, she could buy $450 worth of consumer goods and have 70 hours of leisure.
The increase in real income causes her to spend more time with her family.
She wants more leisure and less labor because of the increase in real income.
The income and substitution effects of an increase in wages are different in the labor market.
The income effect increases leisure time while the substitution effect decreases it.
We don't know if an increase in the wage will cause a worker to demand more leisure time or less leisure time.
An example will show why we can't predict a worker's response to a wage increase.
If each nurse in Florence works 36 hours per week at $10 an hour, the wage will increase to $12.
The man works fewer hours.
If he works 30 hours instead of 36 hours, he will get 6 hours of extra leisure time and still make the same amount of money.
Sam works the same hours.
If Sam works 36 hours per week, he will get an additional $72 of income and the same amount of leisure time.
The woman works more hours.
If she works 43 hours instead of 36, she will sacrifice 7 hours of leisure time but still make $516, compared to only $360 at a wage of $10 per hour.
The studies confirm that each of the responses is reason able.
Some people work more, some people work less, and some people work the same amount.
The aggregate response to an increase in the wage varies across markets.
The supply side of the labor market is ready to be considered now that we know how individual workers respond to wage changes.
The market supply curve for labor is positively sloped, consistent with the wage and quantity of labor the law of supply, and there is a positive relationship between the wage and the price of supplied.
One hour worked per employee.
Some nurses will work more hours, some will work less hours, and some will work the same number of hours when the wage increases.
The change in the average number of hours worked is likely to be relatively small, because we don't know for certain whether the average number of work hours will increase, decrease, or stay the same.
Some workers will switch from other occupations to nursing because of an increase in the nursing wage.
Florence offers higher wages for nurses in other cities.
There is no excess demand for labor or excess supply of labor because the quantity supplied equals the demand.
Taxi drivers earned M32_OSUL5592_09_GE_C32.
A recent study of the taxi market in New York City shows that an increase in the regulated fare decreases the amount of labor supplied.
In 2004, a 19 percent increase in the regulated fare decreased the miles driven per cabbie.
The elasticity of miles driven is -0.22 with respect to the wage.
The quantity of labor supplied decreases by 2.2 percent if the wage increases by 10 percent.
There are exercises related to 2.6 and 2.11.
Taxi drivers have a lot of flexibility in choosing their work hours, and we can observe their response to an SOURCE: Based on Orley Ashenfelter, Kork Doran, and Bruce Schaller.
An increase in the taxi fare, which is evidence on the long run elasticity of labor supply, is an increase in the wage.
The second and third effects reinforce one another, so an increase in the wage causes movement upward along the market supply curve.
Although individual workers may not work more hours as the wage increases, the supply curve is positively sloped because an increase in the wage changes workers' occupational choices and causes migration.
We're ready to put demand and supply together to think about equilibrium in the labor occupations and levels of human market.
There is no pressure to change the capital in a market equilibrium.
The market has reached an equilibrium because there is no excess demand for labor or excess supply.
We know from Chapter 4 that a change in demand causes the equilibrium price and the equilibrium quantity to move in the same direction: An increase in demand increases the equilibrium price and quantity, whereas a decrease in demand decreases the equilibrium price and quantity.
Suppose the demand for medical care increases.
Increasing the amount of medical care demanded will shift the demand curve for nurses to the right, as firms demand more hours of nursing services.
We know from Chapter 4 that a change in supply causes the equilibrium price and quantity to move in opposite directions: An increase in supply decreases the equilibrium price but increases the equilibrium quantity, whereas a decrease in supply increases the equilibrium price but decreases the equilibrium quantity.
A new television program that makes nursing look like an attractive occupation could cause a large number of young people to become nurses rather than accountants, lawyers, or doctors.
The supply curve for nurses will shift to the right at each wage.
The equilibrium wage and quantity will change.
The model of the labor market can be used to show how the minimum wage affects employment.
The minimum wage in 2012 was $7 per hour.
If a minimum wage is established, it should be at least $7 per hour.
The minimum wage decreases the amount of labor restaurants use.
Some workers keep their jobs and get a higher wage.
Some workers lose their jobs.
Losing 1,000 hours of restaurant work per day equates to a loss of 200 jobs.
The price of meals increases as a result of the wage increase.
There are winners and sinners from the minimum wage.
At the expense of other workers and diners, workers who keep their jobs gain.
Wages vary across occupations.
Professional athletes earn more than medical doctors, college professors, and janitors.
If the demand for workers in that occupation is small, the wage for that occupation will be high.
Baseball players need to be able to hit balls at 90 miles per hour to play professional baseball.
The equilibrium wage will be high if supply is low relative to demand because few people have the skills, training costs are high, or the job is undesirable.
Another for skillful players, bidding up the wage.
High wages are paid to the few people who have the skills for these jobs.
Education and training can be used to acquire skills for some occupations.
Legal skills must be acquired in law school in order for a doctor to be a medi cal doctor.
A relatively small number of people will become skilled if it is expensive to acquire these skills.
Workers are compensated for their training costs by the higher wage.
There are 3 bad working conditions.
Workers demand higher wages because of undesirable working conditions in some occupations.
Wages are higher for jobs that require people to work odd hours or are dirty.
Wages are higher for dangerous jobs because of the risk of injury or death.
lumberjacks, boilermakers, taxicab drivers, and mine workers are the most at risk of dying on the job.
Steelworkers receive a wage premium for the higher risk of being killed on the job.
The United States has an average job death rate of 1 in 25,000 workers per year.
The wage is about 1 percent higher for a worker who faces twice the average death rate.
The number of people in certain occupations is restricted by the government and professional licensing boards.
Women are less productive and receive lower wages because they have less edu cation.
Many women interrupt their careers to raise children, which is an important factor in the lower level of work experience.
Lower productivity is the most important factor in the gender gap according to the study.
The wages of clerical and service occupations are lower than those of craft and professional occupations.
Compared to men, women express stronger preferences for low wage occupations, such as clerical and service occupations, and weaker preferences for high wage occupations, such as craft and operator occupations.
Men prefer high-wage professional and technical occupations.
Women will receive lower wages if employers have a bias against hiring them for high-paying occupations.
Between 7 and 25 percent of the gender gap can be attributed to the fact that women are less confident than men in attaining their desired occupations.
Women's wages will be lower if employers pay women less than men.
There is some evidence that wage discrimination is a factor in the gender pay gap, but the results of the study are mixed.
The conclusion of the study is that differences in productivity andational status are the most important factors in the gender pay gap.
It appears that the large number of women in low-paying occupations is a result of both the occupational preferences of women and employer discrimination.
African American males who work full time earn 73 percent more than their white counterparts, while African American females earn 85 percent more than their white counterparts.
Hispanic males earn 65 percent as much as white males, while Hispanic females earn 78 percent as much as white females.
The wage gap is caused by discrimination.
African American and Hispanic workers are paid less for similar jobs and are denied the chance to work in high-paying jobs.
Recent studies suggest that racial discrimination decreases the wages of African American men by about 13 percent and that these earnings differences have decreased over the last few decades and are now small enough.
There are a number of factors that contribute to the differences in skills brought to the labor market.
In urban areas, one-third of African American high school students have above-average scores on reading and math exams, compared to two-thirds of white students.
The increase in earnings from a college degree was 74 percent in 2009.
College graduates have more job options than high school graduates because they have the skills necessary to enter certain occupations.
The supply of workers for low-skill jobs is plentiful, and the equilibrium wage for these jobs is low, because both high school grads and college grads can fill jobs that require only a high school education.
The skills required for certain occupations are increased by the increase in a person's wage.
A different perspective on certain occupations is required for a second explanation of the college premium.
An employer can't determine if a prospective employee has certain skills for a job.
It is not possible for an employer to determine if a prospective employee is a good manager of time because most managerial jobs require the employee to manage timeeffi ciently.
It is possible that these skills are required to complete a college degree.
To get passing grades in all your classes, you must be able to use your time efficiently.
A signal to employers is provided by the information about a person's work complete college.
The skills are conveyed by completing college.
The college premium has doubled over the last few decades due to technological change.
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