Week 13 — Factor & Labor Markets
Why this matters
A nursing student weighing a night-shift bonus and a business major planning a café's hiring are reading the same labor market.
In plain language
This week the firm stops selling and starts hiring. You will see why a business wants workers only because of what they make, which economists call a derived demand (a demand for an input that comes from the demand for the product). You will put a dollar value on each worker's extra output, the value of the marginal product of labor (the price of the product times the extra output one more worker makes), and use it to decide how many people a bakery should hire. Then you will bring back supply and demand to see how a market sets a wage, and why some jobs pay more than others. Last, you will meet three live debates about pay and learn to keep what the model predicts apart from what people think ought to happen.
- Already covered: Week 9 built the bakery's production schedule and diminishing returns.
- This week: derived demand, the hiring rule, and why wages differ.
- How they connect: marginal product times the bread price becomes labor demand.
- Where we're going next: Week 14 turns to market failure.
Focus
Why does a firm hire the number of workers it does, and why do some jobs pay more?
By the end of this module, you should be able to:
- [ ] compute the value of the marginal product of labor
- [ ] apply the hiring rule to choose how many workers to hire
- [ ] tell a movement along labor demand from a shift
- [ ] label pay claims as positive or normative
To-do
Plan your week
- Read Chapter 13 (40–50 minutes), then the lecture and slides.
- Work the tutorial (60–90 minutes) and practice set (15–25 minutes).
- Do the Model Workshop (90 minutes), discussion, and assignment.
- Take the quiz.
This week's checkpoint: at a given price and wage, choose how many workers to hire.
You've got this
Take it in order, and ask your instructor early.
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