Equilibrium in the market labor is established at the intersection of market demand and market supply. Balance at a point E corresponds to the level of wages W where will be sold and bought L E labor for a certain time (Fig. 8.3).

At the point E the labor market is in equilibrium, since the demand for labor is equal to the supply of labor. Hence the point E determines the position of full employment, and wage acts as the price of equilibrium in the labor market.

At higher wages W′ There will be a surplus of labor in the labor market, measured by the segment L′ D L′ S ... Competition arises among unemployed workers, which will entail a decrease in wages.

At any wage W″ Below equilibrium W E there will be a shortage of labor in the labor market, measured by the segment L″ S L″ D, which will lead to competition among entrepreneurs for hiring labor, and, ultimately, to higher wages. Due to the growth of wages, the circle of employees who are ready to offer their labor is expanding.

However, the specifics of the labor supply is manifested in two phenomena acting in opposite directions. It:

Substitution effect;

Income effect.

They are manifested in the elucidation of the reaction of individual workers to an increase in wage rates.

Substitution effect arises when free time (leisure) is viewed as a potential loss at high wages. Leisure time seems to be more and more expensive, and the employee prefers to work instead of leisure. This leads to an increase in the supply of labor. However, with further growth in wages, income effect... It arises when high wages are seen as a source of the possibility of increasing leisure, and not labor, which in this case is regarded as a lower commodity.

32. Physical and loan capital. Rate of return and rate of interest. Equilibrium in the loan capital market.

Physical (production) capital Is an invested, working source of income in the form of means of production. It includes buildings, machine tools, rolling mills, cars, computers and other structures, machines, equipment used for the production of goods and services. In addition, the capital includes stocks of raw materials, materials, semi-finished products, components, which with the help of labor instruments are converted into other goods in one production cycle. This aspect of capital reflects more fully than others the interpretation of the German word “ withapital", - French" withapital"- the main property, the main amount and Latin" withapitalis" - main.

At the same time, for the acquisition of production assets, the subjects need money. For these purposes, firms use borrowed funds or cash (loan) capital... Therefore, in another sense, when they say capital, they mean the investment of money or their investment for the construction of new production facilities, durable resources in order to increase the production of goods and services. In this sense, according to a number of economists, capital is money as a universal commodity of the business world.

Loan interest- the price (income) paid (received) for the use (provision) of loan capital

Lending interest rate (%) Is the ratio of the amount of annual income received on loan capital to the amount of loan capital.

The nominal rate shows the expected return on equity, the real rate shows the actual return on equity adjusted for inflation.

Low rate% stimulates investment, high rate%- reduces.

An entrepreneur, investing money in production, expects to receive profit - income on entrepreneurial ability.

Rate of return productive investment (capital) expresses rate of return (profitability), reflecting the efficiency of using the acquired factors of production:

In these conditions:

interest rate (i, r) - resource costs

rate of return (R) - return on capital

Equilibrium in the capital market is established as a result of the interaction of the demand for capital as investment resources and the supply of capital as temporarily free funds.

11. Elasticity of the offer. Factors affecting supply elasticity.Elasticity of supply is an indicator of the relative change in the quantity of goods offered on the market in accordance with the relative change in the competitive price. The degree of change in the volume of supply, depending on the increase in price, characterizes elasticity of supply... where ∆ Q s- the changed value of the offer.

If the proposed quantity of items ( Q s) when their prices change remains unchanged, then we are dealing with an inelastic supply ( E s = 0).

When the slightest decrease in the price of a product causes a decrease in supply, and the slightest increase in price leads to an increase, then this is an absolutely elastic supply ( E s > 1).

If E s= ∞ is the firm's offer in the long run at a stable price

E S<1 - неэластичное предложение (сильное изменение цены вызывает слабое изменение предложения);

Е S = 1 - a weak (strong) change in price causes the same weak (strong) change in supply;

Rice. 3.15. Types of supply elasticity The supply elasticity of a product depends on many factors: on the differentiation of individual costs in different enterprises, the availability of free labor, the speed of capital flow from one industry to another, etc. Supply elasticity factors First, one of the determining factors of the elasticity of the supply of goods is the mobility of the factors of its production; the speed at which these factors move from other areas of application affects the ability of sellers to quickly change the volume of production. For example, the supply of land on which to grow grapes is inelastic, since it is almost impossible to expand it ( E s= 0). On the contrary, goods such as computers, ice cream, cars are characterized by an elastic supply, since their producers can increase their production when prices rise. Secondly, the elasticity of supply depends to a large extent on the time interval. As with demand, the elasticity of supply increases over long-term time frames. In the long run, factors of production are more mobile, and the adaptation of producers to new market conditions brings the possibilities of output closer to the changed market demand, which leads to an increase in the elasticity of supply.

12.State influence on market pricing (taxes, price controls, subsidies) and its consequences. State regulation of prices is necessary to prevent: inflation of price increases in the presence of persistent shortages; monopoly of producers; a sharp rise in prices for exploited raw materials and fuel. State regulation of prices promotes the creation of normal competition, the achievement of certain social results. Measures of influence on producers by the state can be direct (by establishing certain pricing rules) and indirect, through economic levers. Direct state regulation of prices is applied only in highly monopolized industries. Freezing of prices and wages limits the inter-sectoral outflow of capital, inhibits investment policy, reduces the level of business activity, restrains the growth of incomes. purchases of goods and services; tax policy. Price controls restrain production, stimulate consumption, suppress technological advances and make them dependent on imports. The state can influence the pricing process in three ways: railway tariffs, housing and communal services, travel in public transport), freeze prices, fix the prices of monopolist enterprises; determine the rules according to which enterprises themselves set state-regulated prices (established not the marginal level of prices for certain types of goods; regulation of the main parameters of the price, such as profit, discounts, indirect taxes, etc .; determination of the maximum level of a one-time increase in prices for specific goods); establish market "rules of the game", i.e. introduce a number of bans on unfair competition and market monopolization (a ban on horizontal and vertical price fixing; a ban on dumping). Tax regulation is one of the fairly effective principles of state pricing policy. All taxes can be divided into two large groups: direct and indirect. Direct taxes are paid directly from the income of the taxpayer, while indirect taxes are included directly in the price of the product and are paid by the consumer upon purchase. Indirect taxes lead to an increase in the equilibrium price and a decrease in sales, in addition, they reduce the manufacturer's revenue. Consequently, the burden of the indirect tax is shared between the consumer and the producer. Methods of tax regulation of prices include the establishment of value added tax (VAT) and the amount of excise duty. Exemption of certain goods from VAT, as well as changing the rate of this tax on certain goods, can effectively influence structural changes and the development of production in the most important sectors of the national economy. In most countries, a list of excisable goods and the amount of excise duty have been determined, which significantly affect prices. The establishment of excise taxes by the state is intended to ensure the distribution of consumption of goods, to protect domestic producers, to regulate the profits of commodity producers in the event of a large difference between prices and production costs, to replenish the state budget. State subsidies are used as price regulation measures. Some industries require constant government support (for example, the coal industry) in the form of subsidized supplements to producers or consumers. A subsidy is an allocation from the state budget directed to cover losses by an enterprise, received, in particular, through the sale of its products at state prices that do not cover its costs. In other words, this means that if a subsidy is established for a product, then one part of the real price is paid by the consumer, and the other - by the state. Thus, the price of the product for the consumer is reduced.

30.The demand for resources in the markets for factors of production: nature, factors, underlying principles.

Elasticity of supply is the seller's reaction to price changes

Since the relationship between the price and the amount of products offered is always direct, the supply elasticity coefficient is always greater than 0.

Es = 1- the offer is elastic (the seller reacts noticeably to price changes)

E S> 1- highly elastic ( Q sales are growing - rapid price change)

E S< 1 - inelastic (the seller weakly reacts to price changes)

Es = 0- absolutely inelastic offer

Market equilibrium

Joint analysis of supply and demand makes it possible to determine in the economic "space" a certain point of optimization of the interests of consumers and producers. This convergence of interests is characterized by education market price is the price at which the volumes of supply and demand are equal, i.e. consumers can buy as many goods and services as producers want to sell.

So, at any price lower than the market price, for example R 1 there is an excess of demand over supply and, as a consequence, a shortage of goods in the volume Q 1 Q 2... Competition from a large number of buyers with a limited quantity of product will force sellers to raise prices and increase product output. At the same time, the competition of consumers with each other weakens, the amount of demand decreases and the system gravitates towards the equilibrium point T(fig. 5).

At a higher price, for example R 2, there is an excess of supply over demand and, as a consequence, a surplus of goods in the same volume Q 1 Q 2... Here, a large number of sellers compete with each other for favorable conditions of sale, which, with a small number of buyers, can arise only if producers reduce prices while reducing product output. Consumers will respond by increasing purchases, and the system will again rush to the equilibrium point T.

Consumer surplus- the difference between the market price at which the consumer purchased the product and the maximum price that he is willing to pay for this product.

Producer surplus- the difference between the current market value of the product and the minimum price at which the manufacturer is ready to sell his product.

Labor market in perfect competition. Labor supply and demand

Labor market Is a set of economic relations regarding the sale and purchase of labor. The labor market is a dynamic system in which the volume, structure, demand and supply of labor are formed.

The labor market in conditions of perfect competition has the following features :

• a large number of firms competing in the market when hiring workers for this type of labor;
• the presence of many employees of the same qualifications, offering their work;
• neither firms nor employees can dictate rates wages .

The subjects of demand in the market are entrepreneurs and the state, and the subjects of supply are workers with their skills and abilities. The object of sale and purchase is a specific commodity - labor (labor). The price of labor is wages.

When hiring additional employees, firms are guided by the following considerations :

The demand for any factor is determined by the desire for maximum profit. Profit is maximized by the growth of labor attraction up to such a level when the income from the marginal product of labor (income from an additional unit of production received with the help of an additional worker - MRPL) will be equal to the marginal cost of it (wages - W). Therefore, it will be profitable for the company to hire employees while observing the equality MRPL = W.

Labor demand is inversely related to wages ... With an increase in wages, the demand for labor on the part of the entrepreneur decreases, and with a decrease in wages, the demand for labor increases. Labor supply is directly dependent on wages .

When considering a job offer, it is necessary to take into account two relatively independent effects that affect the choice of each individual person: more rest or more work. These are the substitution effect and the income effect.

Substitution effect the next process is called. With an increase in wages, every hour of time worked is better paid, therefore, every hour of free time is a lost profit for the employee, so there is a desire to replace free time with additional work. It follows from this that free time is replaced by the set of goods and services that the employee can purchase with the increased wages.

The essence income effect consists in the fact that as wages rise, the supply of labor of an individual worker is reduced for the sake of an alternative to work time of pastime and leisure.

Hence, it is clear that the substitution effect from an increase in wages will lead to an increase in the supply of labor, and the effect of income will be expressed in its reduction. The final change in labor supply depends on the relative strength of the substitution effect and the income effect .

The curve of the individual labor supply is clearly shown in Figure 1 ... We see that an increase in wages from W1 to W2 leads to an increase in the number of working hours from t1 to t2. The substitution effect prevails here. The SL curve is ascending. A further increase in wages from W2 to W3 is not reflected in an increase in the duration of working hours, the employee works as much as before. Here the substitution effect is equal to the income effect. The SL curve is a vertical line. An increase in the wage rate from W3 to W4 leads to a reduction in the working day from t2 to t3. Here the income effect is stronger than the substitution effect. The SL curve is downward.

Although the individual labor supply curve may bend, in general, the market supply curve of any type of labor tends to increase (Figure 2), reflecting the fact that in the absence of unemployment hiring firms will be forced to pay higher wage rates in order to get more workers.

The slope of the market demand curve for labor is directly proportional to the price elasticity of the demand for the final good that the labor produces.

The price elasticity of demand for labor reflects the price elasticity of demand for a product.

Labor Elasticity of Demand(E D w) shows the relative change in the volume of demand for labor under the influence of a change in the wage rate by 1%: E D w = (ΔQ / Qd) / (ΔW / W) where ΔQ / Qd is the relative change in demand for labor;
ΔW / W is the relative change in the wage rate.

or E D W =% Qd /% W% Qd - change in demand for labor in percent,% W - change in wage rates in percent.

The meaning and essence of labor demand elasticity: by what percentage will the market demand for labor change if the wage rate changes by 1%.

Types of labor demand in terms of elasticity.

1. E D W = 0. Absolutely inelastic demand for labor - the labor of narrow specialists, unique single professions;
2. E D W< 1. Неэластичный спрос на труд - при изменении заработной платы на 1% спрос на труд изменяется менее, чем на 1% (труд виноделов, труд государственных служащих);
3. E D W = 1. Unit labor elasticity. When wages change by 1%, the demand for labor also changes by 1% (labor of engineers, builders);
4. E D W> 1. Elastic demand for labor. When the price changes by 1%, the demand for labor changes by more than 1% (labor of service personnel);
5. E D W = ∞. Perfectly elastic demand for labor;

Labor demand elasticity(with respect to changes in wages) the more, than:

1. higher price elasticity of demand for the final good that this labor creates;
2. labor is more easily replaced by other factors of production;
3. higher supply elasticity of other factors;
4. higher share of wages in total costs;
5. longer time period.

Elasticity of the labor supply on the market

Elasticity of labor supply(E S W) shows the relative change in the supply of labor under the influence of a change in the wage rate by 1%: E S W = (ΔQ / Qs) / (ΔW / W) where ΔQ / Qs is the relative change in the supply of labor;
ΔW / W is the relative change in the wage rate.

or E S W =% Qs /% W% Qs - change in labor supply in percent,% W - change in wage rates in percent.

The meaning and essence of the elasticity of the labor supply: by what percentage will the labor supply change if the wage rate changes by 1%.

Types of labor supply in terms of elasticity.

1. E S W ≤ 1. Inelastic proposal - pop stars, famous athletes;
2. E S W = 1. Unit elasticity. When wages change by 1%, the supply also changes by 1% (labor of ordinary professions);
3. E S W> 1. Elastic offer. When wages change by 1%, the supply changes by more than 1% (low-medium-skilled labor);

The elasticity of the market supply curve (labor mobility) of a certain type of labor depends on the following factors:

1. the complexity and costs of changing employment;
2. time.

In a highly competitive labor market, the company is one of the many buyers of labor services that are offered by many sellers (employees). Therefore, an individual enterprise cannot influence the price of labor and perceives it as such "that is set by the market. This means that the labor supply curve 5b in a highly competitive labor market has the form of a horizontal line that passes through the market wage rate, since the supply of labor in these conditions is perfectly price elastic (Figure 13.4).

With perfect competition in the labor market, the average cost per unit of labor (AC £) and the marginal cost of an additional unit of labor coincide with a constant wage rate. This means that if the level of the wage rate remains unchanged, the enterprise will be able to hire as many workers as it needs. The same is true in a separate industry, if this industry is not the main employer in the region or in a particular specialty. But for a particular industry, the horizontal labor supply curve is the exception rather than the rule.

Labor supply for the industry

As a rule, large sectors of the economy are the main consumers of hired labor of a certain qualification or specialty. Thus, the coal industry in Ukraine is the only employer for miners, and foundry workers are in demand for metallurgical hectares.

Rice. 13.4. Supply curve for an enterprise in a highly competitive labor market

husk. Under these conditions, the labor supply curve will have a positive (upward) slope (Figure 13.5).

The reasons for the upward slope of the labor supply curve of the industry:

1) the excess of the effect of substitution of leisure by work over the effect of income, caused by a change (growth) in the wage rate, turns out to be that as the wage rate rises, the labor supply increases not only by those who are already employed in the production process, but also by those who are already employed in the production process. who refused to participate in the production process at the lowest wage rate (students, pupils, pensioners, women caring for children, old and sick, etc.);

2) industries with a high wage rate become attractive to workers in other industries with a lower wage rate. Since the total number of economically active population (labor force) in the short term is not

variable, then the "spill-over" of workers in high-paid industries causes a deficit of hired labor in comparison with the amount of capital in low-wage industries. The consequence of this is the growth of the marginal product of labor in low-paid sectors, which forces enterprises in these sectors to increase wages;

3) an increase in the opportunity cost of using labor for workers in other industries.

Labor supply across the economy

World experience shows that an increase in the wage rate causes an increase in the supply of labor, that is, the curve B 1 for the economy as a whole has a positive (upward) slope. If we assume that the growth of wage rates will have a stable tendency to growth in the future, then, with other conditions unchanged, the supply curve would have the form (Fig. 13.36), because the wage growth several times with a constant (saturated) volume of economic consumption benefits would lead to the union of the worker and an increase in free time. But NTP during this time, obviously, will offer us a lot of new material goods and services, the existence of which we today do not even know. To meet these needs, employees will increase the supply of labor.

Labor supply at the level of the economy as a whole is the subject of macroeconomic research.

The problem of price formation for resources is a microeconomic problem. So let's go back to the micro level again.