econ 201 ch 12

  1. market work
    time sold as labor
  2. is leisure a normal good
    yes, it is subject to the law of dimishing returns
  3. nonmarket work
    time spent getting an education or on do-it-yourself production for personal consumption
  4. leisure
    time spent on nonwork activities
  5. what are the 3 uses of time?
    • market work
    • non-market work
    • leisure
  6. what is meant by maximizing utility
    you attempt to maximize utility by allocating your time so that the expected marginal utility of the last unit of time spent in each activity is identical
  7. substitution effect of a wage increase
    a higher wage encourages more work because other activities now have a higher opportunity cost
  8. income effect of a wage increase
    a higher wage raises a worker's income, increasing the demand for all normal goods, including leisure, so the quantity of labor supplied to market work decreases
  9. backward-bending supply curve
    • as the wage rises, the quantity of labor supplied may eventually decline; the income effect of a higher wage increases the demand for leisure, which reduces the quantity of labor supplied enough to more than offset the substitution effect of a higher wage
    • ie why rock-stars work less the more famous they become
  10. what are non-wage determinants of labor supply?
    • other sources of income
    • nonmonetary factors (difficulty of job, work environment, status of the position)
    • value of job experience (internships)
    • taste for work
  11. why do wages differ?
    (a profit maximizing firm hires labor up to the point where labor's marginal revenue product equals its marginal resource cost)
    • differences in training, education, age, and experience
    • differences in ability
    • differences in risk
    • geographic differences
    • discrimination
    • union membership
  12. winner-takes-all labor market
    markets in which a few key employees critical to the overall success of an enterprise are richly rewarded
  13. labor union
    a group of workers who organize to improve their terms of employment
  14. craft union
    a union whose members have a particular skill or work at a particular craft, such as carpenters or plumbers
  15. what did the Clayton Act of 1914 do for labor unions?
    exempted them from antitrust laws, meaning unions at competing companies could legally join forces
  16. industrial union
    a union of both skilled and unskilled workers from a particular industry, such as all autoworkers or all steelworkers
  17. collective bargaining
    process by which union and management negotiate a labor agreement
  18. mediator
    an impartial observer who helps resolve differences between union and management
  19. binding arbitration
    negotiation in which union and management must accept an impartial observer's resolution of a dispute
  20. strike
    a union's attempt to withhold labor from a firm to halt production
  21. what are three ways a union might increase wages
    • forming an inclusive, or industrial union
    • forming an exclusive, or craft union
    • increasing the demand for union labor
  22. how do unions increase the demand for union labor?
    • increase demand for union-made goods (direct public appeal to by union made goods and restricting supply of nonunion goods)
    • increase productivity of union labor (reducing labor turnover)
    • featherbedding (forcing employers to hire more members than they want or need)
  23. featherbedding
    union efforts to force employers to hire more workers than demanded at a particular wage
Card Set
econ 201 ch 12
labor markets and labor union