ECON 306 Lecture Notes - Lecture 21: Occupational Licensing, Demand Curve, Pareto Efficiency
24 May 2017
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Document Summary
The highest point on the isoprofit curve has to be on the firms" demand curve. Above the wage w0m the firm makes negative economic profits and shuts down so it"s bad for both the union and the firm. Below the wa (alternative wage), the firm is out of business (so there are no workers) and it"s bad both for the union and the firm. Between wu and w0 the union can get the same utility at lower wage. Where exactly in the bargaining range in not for this course. Unins bargain over the wage, but also attempt to relax the demand constraints. The impact of the change on wage on employment depends on : Whether dl is increasing or decreasing, depending on whether the industry is expanding or contracting. Expanding and contracting industries (not in text) (i) Expanding: with dl increasing, there can be higher wages and higher employment.
