ILRLE 2400 Lecture Notes - Lecture 22: Budget Constraint, Reservation Wage, Demand Curve
30 Dec 2016
School
Department
Course
Professor
Document Summary
Similar to prelim, quizzes, and review questions. At least 1 will be on material since the prelim (ch. Other questions can be from all areas of the course. Positive economics: predict behavior or analyze behavior (eg. how would a firm react if x) Normative economics: policy initiatives, how to benefit society. Ideally the gainers gain more than the losers lose; gainers should compensate the losers in order to create a net zero effect on them. Labor demand curve slopes down (see essay #2) Labor supply curve slopes up (see essay #1) Details of the demand curve for labor. Profit maximizing condition in the short run. Ignore capital because it cannot be changed in the short run. In the long run, employ capital until mrpk = c (cost of capital) Firms set up so that w/mpl = c/mrc. This is what drives the substitution effect. Show which effect will dominate given a set of conditions.
