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Role of governments in economic growth
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Elasticity of Labour Demand Labour is a derived demand realised by the demand for the product that the labour will be producing. The theory of ‘labour demand’ explains the behaviour of the firm with the key principle being to achieve the optimal amounts of labour employers will want to utilise at different wage levels. We must make several assumptions when describing how the long run labour demand is derived. Firstly we must assume that firms are profit maximisers and therefore will attempt always to minimise any costs incurred. Further assumptions to simplify analysis of labour demand are that there are no costs of employment other than hourly wages and productivity of labour is independent of time worked. I.e. Labour is homogenous. The production process involves only two inputs, Labour (L) and Capital (K): The firmsÂ’ production functions in the short and long run: qSR = f(K, L) qLR = f(K, L) In the long run, the firms’ capital stock is not fixed at any level; K is now changeable as opposed to the short-run where the firm is burdened with a stock of capital that might not be the optimal level under the current market conditions. In the indeterminate ‘long run period’, the firm will therefore be able to select optimal combinations of its variable stock. A firm will now have more than one tool to use in order to capitalize on profits. The only long run constraint of the firm would be given by technology. To find the preferred choice of inputs we can examine different quantities of K and L given the ratio of the input prices with a level of output. These choices are depicted in a curve called an isoquant. An isoquant demonstrates a set of points where output is identical but different combinations of labour and capital are possible. Diagram Isoquant Criteria: · Isoquants are downward sloping · Isoquants can not intersect · A higher isoquant is associated with a higher level of output · An isoquant must be convex to the origin (displaying diminishing returns to scale) The slope of the isoquant is derived by moving between two points on the curve. Moving from A to B will maintain the level of output but change the ratio of inputs. In this case it will lower the capital stock from K1 to K2 but increase the level of employment from L1 to L2 .Output is decreased by the units of capital stock cut multiplied by the marginal product of capital, but i... ... middle of paper ... ...as I have summarised), a one percent rise in the wage leads to a 30 per cent drop in employment levels. Private strategies are also affected, as a unionÂ’s bargaining strategy will be influenced by the elasticity. The more inelastic the employers demand for labour, the stronger the negotiations will be to oppose a wage cut. Unions would be more uncompromising when offered a lower wage. References: Books - Borjas, G. J. (2004), Labour Economics, 3rd Edition, McGraw-Hill - Hamermesh, D., Rees, A. (1988), The Economics of Work and Pay, 4th Edition, Harper & Row - McConnel, C. R., Brue, S. L., (1989), Contemporary Labour Economics, 2nd Edition, McGraw-Hill Book Company Websites - www.jstor.ac.uk - http://labour.ceps.lu/ Journals - Chiswick, C. U. (1985), “The Elasticity of Substitution Revsited: The effects of secular changes in labour force structure”, Journal of Labour Economics, Vol 3 No. 4, pp 490-507 - Oi, W. (1962), “Labour as a quasi-fixed factor”, Journal of Political Economy, Vol 70, pp 538-55 - Symons, J. and Layard, R. (1984), “Neoclassical demand for labour functions for six major economies”, Economic Journal, Vol 94, pp 788-99
...bsp;Full-time workers receive just 3 percent raises, one percentage point above the current low rate of inflation
Between 2009 and 2012, income gains by the top one percent increased by over 30 pe...
Members of organized labor and Unions sacrificed much in the strive for higher wages. Workers were paid very poorly and did not make enough money to fully support themselves and their families. For example in modern times, citizens in New York City hold protests to raise hourly wages to a minimum of fifteen dollars an hour. Throughout time Union and labor workers have been paid poorly. Document A clearly shows evidence that although efforts were made, hours and wages were not changing as they should of been. Although the impact to change hour and wages didn't Chanel as much, it does not mean a great deal of effort was not made.
Assessing the capital structure of any firm is important for investors attempting to determine if...
...ry can be different from another. There is a reason people wants capital system and there is a huge differences and conflict between capitalized and uncapitalized countries.
...th little fixed capital, short life capital or with raw materials that have high turnover.
Elasticity of demand is an important variation on concept of Law of Demand. Demand can be classified as perfectly elastic, elastic, inelastic, unitary and perfectly inelastic. An elastic demand is one in which the change in quantity demanded due to a change in price is large. An inelastic demand is one in which the change in quantity demanded due to a change in price is small. An unitary demand is when quantity changes at the same rate as price.
Firstly, AL is defined as effective labour; this will become an important concept later. The economy is assumed large enough so that all improvements from specialisation have been exhausted, and the only inputs that are of any importance are labour, capital and labour. Combining these assumptions, the nature of the production function is such that it exhibits constant returns to scale. The production function can now be illustrated in its intensive form [IMAGE] Inputting the Cobb Douglas function mentioned earlier, the intensive form of the production function is [IMAGE]. The variables k and y are not of interest in their own right; instead, they help us gain an idea into how the main variables interact.
Finding the perfect capital structure in terms of risk and reward can ensure a company meets shareholder expectations and protects a firm in times of recession. Capital structure refers to how a business puts its money to “work”. The two forms of capital structure are equity capital and debt capital. Both have their benefits and limitations. Striking that perfect balance between the two can mean the difference between thriving versus trying to survive.
A change in quantity supplied is just a movement from one point to another in the supply curve. In opposite, the cause of a change in supply is a change in one the determinants of supply that shifts the curve either to the left or the right. These determinants are the resource prices, technology, taxes and subsidies, producer expectations, and number of sellers. An equilibrium price is required to produce an equilibrium quantity and a price below that amount is referred as quantity supplied of zero no firms that are entering that particular business. If the coefficient of price is greater than zero, as the price of the output goes up, firms wants to produce more of that output. As the price of the output goes up it becomes more appealing for the firms to shift resources into the production of that output. Therefore, the slope of a supply curve is the change in price divided by the change in quantity. The constant in this equation is something less (negative number always) than zero because it requires strictly a positive...
In the workplace, over the years gender inequality has become a big topic of discussion. The discussion of gender inequality ranged from wages to having the higher level positions within the job. As stated in Gender Pay Equality “On a percentage basis, a woman earns only 79 percent of what a man earns. This is known as the “gender earnings ratio.” The 21-percent
...d be through numbers, wages and benefits of the employees. American employees previously receiving $28 per hour will now receive $14, employees have fewer benefits, and a shift in retiree health care (Barile, 2014).
At $38, Q = 840 – 0.50(38) = 821.The quantity demanded is 821 when the price is $38.
Modigliani & Miller, M&M, (1958) found that in a world without taxes, the value of the firm is not affected by its capital structure, and also that the total return to investors remains the same regardless. M&M showed the
are ever increasing. Contrary to the popular myth that private equity firms weaken companies by