ECON 306 Lecture Notes - Lecture 21: Demand Curve, Occupational Licensing, Pareto Efficiency

• School: McGill University
• Department: Economics
• Course: ECON 306
• Professor: Paul Dickinson

Document Summary

The highest poi(cid:374)t o(cid:374) the isoprofit (cid:272)ur(cid:448)e has to (cid:271)e o(cid:374) the fir(cid:373)s" de(cid:373)a(cid:374)d (cid:272)ur(cid:448)e. Above the wage w0(cid:373) the fir(cid:373) (cid:373)akes (cid:374)egati(cid:448)e e(cid:272)o(cid:374)o(cid:373)i(cid:272) profits a(cid:374)d shuts do(cid:449)(cid:374) 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) a(cid:374)d it"s (cid:271)ad (cid:271)oth for the u(cid:374)io(cid:374) a(cid:374)d the fir(cid:373). 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.