Class Notes (920,493)
CA (542,265)
UTSG (45,859)
ECO (1,645)
ECO101H1 (575)
Jack Carr (83)
Lecture 23

Lecture 23-Workers are Paid Their VMP

3 Pages
99 Views

Department
Economics
Course Code
ECO101H1
Professor
Jack Carr

This preview shows page 1. Sign up to view the full 3 pages of the document.
SS
15,000
DD = VMP
w
L
Tuesday, January 12, 2010. Workers are Paid Their VMP
What determines wage rate of:
Day-care workers ($15,000 per year)
Computer programmers ($50,000 per year)
Baseball stars ($5 million per year)
P = MC
Choose q to maximize profits
W = VMP
Choose labour to maximize profits
Insight
,IODERXULVRQO\YDULDEOHIDFWRUWKHQILUP¶VFKRLFHRIRXWSXWLVDOVRWKHILUP¶VFKRLFHRIODERXU
Equilibrium wage (W) is VMP of last worker hired
Day Care Workers
l
SS
w1
DDL = VMP
L
www.notesolution.com

Loved by over 2.2 million students

Over 90% improved by at least one letter grade.

Leah — University of Toronto

OneClass has been such a huge help in my studies at UofT especially since I am a transfer student. OneClass is the study buddy I never had before and definitely gives me the extra push to get from a B to an A!

Leah — University of Toronto
Saarim — University of Michigan

Balancing social life With academics can be difficult, that is why I'm so glad that OneClass is out there where I can find the top notes for all of my classes. Now I can be the all-star student I want to be.

Saarim — University of Michigan
Jenna — University of Wisconsin

As a college student living on a college budget, I love how easy it is to earn gift cards just by submitting my notes.

Jenna — University of Wisconsin
Anne — University of California

OneClass has allowed me to catch up with my most difficult course! #lifesaver

Anne — University of California
Description
SS 15,000 DD = VMP w L Tuesday, January 12, 2010. Workers are Paid Their VMP What determines wage rate of: Day-care workers ($15,000 per year) Computer programmers ($50,000 per year) Baseball stars ($5 million per year) P = MC Choose q to maximize profits W = VMP Choose labour to maximize profits Insight ,IODERXULVRQO\YDULDEOHIDFWRUWKHQILUP¶VFKRLFHRIRXWSXWLVDOVRWKHILUP¶VFKRLFHRIODERXU Equilibrium wage (W) is VMP of last worker hired Day Care Workers l SS w1 DDL = VMP w L www.notesolution.com SS 15,000 DD = VMP 40,000 SS1 Q1 Q Elastic supply of (low opportunity cost) workers Day Care Workers: A Counterfactual Example What if all daycare workers could earn $40, 000 per year as computer programmer? Result: wage rises from $15,000 to $40,000 1RRIGD\FDUHZRUNHUVIDOOVIURP4WR4¶ True or False? ³7KHSULFHRIKRFNH\WLFNHWVLVKLJKEHFDXVHWKHVDODULHVRIKRFNH\VWDUVDUHVRKLJK´ Insight Supply of hockey stars is perfectly inelastic (Would doubling salaries increase the number of stars? NO) Result Salaries are high because the demand for tickets is high Perfectly Inelastic Supply of Hockey Stars w SS DD = VMP w1 DD1 = VMP1 L www.notesolution.com Notes: (1) If demand for tickets Is high, wage will be high [w1 = VMP = 3¶[email protected] (2) If demand for tickets is low, wage will be low [w = VMP = P*MP] Observations 1. Celine Dion (singer): $30 million per year Tiger Woods (golfer): $30 million per year 2. Slightly less talented professionals: $50,000 per year 3. Earnings differential has increased sharply over time &DQ903³(FRQRPLFV´([SODLQ" ³:LQQHU-Take-$OO´0DUNHWV VMP (plus impact of technology) Singers Now: income derLYHGIURP&'VHYHU\RQHFDQFRQVXPHWKH³EHVW´ 19th century: income derived from concerts Golfers Now: LQFRPHGHULYHGIURP79HYHU\RQHFDQFRQVXPHUWKH³EHVW´ 19th century: income derived from ticket sales at tournaments ³%HVW´SOXPEHUHDUQVPRGHVtly) above-average hourly wage 5HDVRQDOOFXVWRPHUVFDQQRWFRQVXPHVHUYLFHVRI³EHVW´SOXPEHU www.notesolution.comTuesday, January 12, 2010. Workers are Paid Their VMP What determines wage rate of: Day-care workers ($15,000 per year) Computer programmers ($50,000 per year) Baseball stars ($5 million per year) P = MC Choose q to maximize profits W = VMP Choose labour to maximize profits Insight ,1O,-4:7L843O;,7L,-O01,.9479K031L728.K4L.0414:95:9L8,O849K01L728.K4L
More Less
Unlock Document


Only page 1 are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

Log In


OR

Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit