ECON 1B03 Lecture Notes - Lecture 3: Opportunity Cost, Marginal Revenue Productivity Theory Of Wages, Working Poor

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Hannah Holmes

Document Summary

The labour supply curve reflects how workers" decisions about the labour-leisure tradeoff responds to changes in opportunity cost. You give up an hour of wages to get an hour of leisure. The opportunity cost of leisure is an hour"s wage. The higher the wage, the more expensive leisure becomes and the more work hours/less leisure an individual is willing to supply. A change in w: is a movement along the labour supply curve. Examples: women wanting to work outside the home after wwii increased the labour supply at all wage levels. Examples: if wages for apple pickers increased, some cherry pickers would switch occupations and the supply of apple pickers would increase (supply of cherry pickers would decrease) Example: an increase in the supply of labour: Makes it profitable for firms to hire more workers. Lowers the value of the marginal revenue product. The government"s goal: to ensure at least a certain wage for workers.