Factor Markets

Session Overview
Earlier in the semester, we discussed the labor supply decisions made by consumers when deciding how much they should or should not work. However, firms have the power to decide how many workers to hire. This lecture focuses on the operation of firms in the factor markets that supply the factors (labor and capital) they use in production. A firm made the decision to hire these workers. In this lecture, discover the determinants of this decision! Image courtesy of Remko Tanis on Flickr. Keywords: Input markets; labor supply; monopsony; expenditure curves; wage discrimination; empirical economics.

Session Activities
Readings Before watching the lecture video, read the course textbook for an introduction to the material covered in this session:

[R&T] Chapter 14, "Imperfectly Competitive Markets for Factors of Production." [Perloff] Chapter 15, "Factor Markets and Vertical Integration." (optional)

Lecture Videos View Full Video

Lecture 18: Factor Markets (00:39:19) Transcript (PDF)

View by Chapter

Determining Demand for Labor (00:11:36) The Monopsony Model (00:13:22) Barriers to Wage Discrimination (00:05:48) Minimum Wage and Employment Rates (00:15:48)

Resources

Graphs and Figures (PDF)

Further Study
These optional resources are provided for students that wish to explore this topic more fully. Textbook Study Materials See the [Perloff] companion website for an overview of the main topics covered in the chapter, as well as quizzes, applications, and other related resources.

Chapter 15