Deck 1: Introduction to Labor Economics

Question 1

What is labor economics Which types of questions do labor economists analyze

Answer 1

Labor Economics is the study of dynamics and function of the markets of labor - where individuals supply their labor and firms demand labor. Labor economics attempt to understand the result pattern of income, employment and wages by looking at the workers and the employers.
Labor economists analyze the study of theoretical, empirical and policy questions concerning the labor market such as unemployment, wages, the income distribution, labor migration etc.,

Question 2

Who are the key actors in the labor market What motives do economists typically assign to workers and firms

Answer 2

The key actors in the labour market are the labours, the employers and the government.
The labours provide their services for the employers.
The employers employ the labours and pay them wages.
The government regulates the labour market. They keep a check on the market so that the labours are not exploited by the employers.
The workers enter the labour market with the motive of earning wages which will help them buy goods for their consumption. The labour wants to get the maximum consumption and also the maximum possible leisure. Thus the labour decides to stay in between the consumption of goods and leisure such that he attains the maximum satisfaction.
The employers enter the labour market to get the labour services at the minimum possible cost or the wage that he has to pay.

Question 3

Why do we need a theory to understand real-world labor market problems

Answer 3

The real world labour market is the market which is dealt with real human beings and not commodities. Unlike commodities, human being behaves different in different situation or may even behave in different manner in the same situation. Thus to make the study easy to be understood we need to have a theory. Since in the real world nothing is static, it would cause a problem for the economists to study a single situation with many dynamic variables. Thus a theory with realistic assumptions is taken to make the study of the labour market easy, which could provide some empirical indications to be tested with the real facts and figures.

Question 4

What is the difference between positive and normative economics Why are positive questions easier to answer than normative questions