Ec302 Essay

Jack Loner

EC302

Labor Economics Homework

Chapter 1: Q2) Who are the key actors in the labor market? What motives do economists typically assign to workers and firms?

The three leading actors in the labor market are workers, firms, and the government.

The motives economists typically assign to workers is motivated by the desire to optimize, to choose the best available option from various choices. In the example the book uses, it regard workers acting in ways to optimize their own well-being.

The motives that economists typically assign to firms is that they want to maximize profits. From the firm’s point of view, the customer is king. The firm will maximize its profits by making production decisions—and hiring and firing decisions, that best serve customer’s needs.

Chapter 2: Q1) What happens to the reservation wage if nonlabor income increases, and why?

The reservation wage will rise as nonlabor income increases. This is because workers want to consume more leisure as nonlabor income increases. This means a larger bribe will be required to convince a wealthier person to enter the labor market.

Chapter 2: Q9) Why have average hours of work per week declined?

It seems that there was a dramatic shift in the labor force participation rates by women and that was one of the reasons there was a sizable decline in hours of work per week. Another reason is the decline in work hours per week due to the increase in leisure hours per week.

There has been evidence that suggest that changes in the economic environment, particularly in wage rates and incomes—can account for many of the observed shifts in labor supply.

Chapter 2: 2-2) What is the effect of an increase in the price of market goods on a worker’s reservation wage, probability of entering the labor force, and hours of work?

The effect of an increase in the price of market goods would cause the worker’s reservation wage to decrease, probability of entering the labor force to increase, and hours of...