Chapter 9 - Wage determination and superstar salaries. After completing this unit, you should be able to: Explain how buyers in the labor market make hiring and salary decisions, demonstrate the importance of the value of the marginal product of labor and the marginal cost of labor, explain why there are pay differences across occupations. | Introduction to Economics: Social Issues and Economic Thinking Wendy A. Stock PowerPoint Prepared by Z. Pan Chapter 9 Wage Determination and Superstar Salaries Copyright © 2013 John Wiley & Sons, Inc. / Photo Credit: BARTON SILVERMAN/© The New York Times/Redux Pictures 1 Explain how buyers in the labor market make hiring and salary decisions Demonstrate the importance of the value of the marginal product of labor and the marginal cost of labor Explain why there are pay differences across occupations Explain why individual salary comparisons are not valid for determining how much society values different occupations Copyright © 2013 John Wiley & Sons, Inc. 2 After studying this chapter, you should be able to: 2 In 2001 Alex Rodriguez signed a 10-year contract for $252 million with the Texas Rangers team. In 2011 Tiger Woods ’s earnings were $75 million Oprah Winfrey ’s earnings were $290 million Average annual earnings for registered nurses, elementary school teachers, and fire fighters were $67,000, $56,000, and $47,000, respectively Copyright © 2013 John Wiley & Sons, Inc. 3 Pay differences across occupations 3 In the labor market, the demand and supply of labor determines worker earnings and the quantity of labor hired. Wages and other labor earnings are simply prices that are determined by the market interactions between buyers and sellers of labor. Copyright © 2013 John Wiley & Sons, Inc. 4 The labor market 4 The buyers of labor are business firms Restaurants, accounting firms, banks, school districts, hospitals, and all the other producers of goods and services in the economy. For superstars: movie studios, sports teams, and those hiring superstars for marketing or endorsement purposes. Copyright © 2013 John Wiley & Sons, Inc. 5 THE BUYERS OF LABOR 5 The Marginal Cost of Labor is the increase in costs that businesses incur from hiring the worker. Including: wages, costs of advertising, screening and interviewing job candidates, training, related taxes and . | Introduction to Economics: Social Issues and Economic Thinking Wendy A. Stock PowerPoint Prepared by Z. Pan Chapter 9 Wage Determination and Superstar Salaries Copyright © 2013 John Wiley & Sons, Inc. / Photo Credit: BARTON SILVERMAN/© The New York Times/Redux Pictures 1 Explain how buyers in the labor market make hiring and salary decisions Demonstrate the importance of the value of the marginal product of labor and the marginal cost of labor Explain why there are pay differences across occupations Explain why individual salary comparisons are not valid for determining how much society values different occupations Copyright © 2013 John Wiley & Sons, Inc. 2 After studying this chapter, you should be able to: 2 In 2001 Alex Rodriguez signed a 10-year contract for $252 million with the Texas Rangers team. In 2011 Tiger Woods ’s earnings were $75 million Oprah Winfrey ’s earnings were $290 million Average annual earnings for registered nurses, elementary school teachers, and fire .
