HAT Manifesto Part 1/3 - Rubric Cube - 250803 edit

 

Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.

PART 6 The Economics of Labor Markets

Chapter 18 of 36 The Markets for the Factors of Production

Section 5 of 20

…

Restated from Chapter 1, the Ten Principles of Economics:

1: people face trade-offs

2: the cost of something is what you give up to get it

3: rational people think at the margin

4: people respond to incentives

5: trade can make everyone better off

6: markets are usually a good way to organize economic activity

7: governments can sometimes improve market outcomes

8: a country's standard of living depends on its ability to produce goods and services

9: prices rise when the government issues too much money

10: society faces a short-run trade-off between inflation and unemployment

…

One of the Ten Principles of Economics, #3: rational people think at the margin.

This thinking at the margin concept is key to understanding how firms decide what quantity of labor to hire.

Table 1 column 3 gives the marginal product of labor, which is the increase in the amount of output resulting from an additional unit of labor.

When the firm increases number of workers from 1 to 2

· the amount of apples picked rises from 100 to 180 bushels

· the marginal product of the second worker is 80 bushels

When the firm increases number of workers from 2 to 3

· the amount of apples picked rises from 180 to 240 bushels

· the marginal product of the third worker is 60 bushels

When the firm increases number of workers from 3 to 4

· the amount of apples picked rises from 240 to 280 bushels

· the marginal product of the third worker is 40 bushels

When the firm increases number of workers from 4 to 5

· the amount of apples picked rises from 280 to 300 bushels

· the marginal product of the fifth worker is 20 bushels

…

As the number of workers increases

· the marginal product of labor declines

· the production function becomes flatter, as in Figure 2

This is because of diminishing marginal product.

At first, with only a few workers, they can pick the low-hanging fruit.

As the number of workers increases, additional workers have to climb ladders and spend more time to pick apples.

… …

rational people and irrational people

gōri-tekina hito to higōri-tekina hito

合理的な人と非合理的な人