EC 201 Lecture Notes - Lecture 19: United Automobile Workers, Demand Curve, Market Power
Document Summary
In the basic compeiive model, irms hire labor, equaing marginal beneit with marginal cost. Labor unions are organizaions of workers that bargain collecively with employers. An existence of union cause reality to deviate from the basic compeiive model. Wage is determined by demand and supply. Imperfect labor market- wage is determined by labor unions. From the auto industry, uaw is a monopoly. Like a monopoly, it faces a downward sloping demand curve. As a result of monopoly power, union workers have higher wages than comparable nonunion workers. If irms are compeiive supplements of goods, each irm will be small. Labor unions bring short run gains at the expense of long run losses. N the short un, the union can increase both wages and employment. Since the demand for labor is more elasic in the long run, the fur will subsitute away from labor to capital. The gains enjoyed by union members may be at the expense of consumers.
