ECON 2200E Lecture Notes - Lecture 1: Indentured Servant, Marginal Revenue Productivity Theory Of Wages, Tax Wedge
Document Summary
If price is too high, quantity demanded will be less than quantity supplied (surplus) If price is too low, quantity demanded will be more than quantity supplied (shortage) Demand shows you marginal benefit (willingness to pay curve) Supply shows us sellers and marginal cost, first units are not as costly. Consumer surplus = willingness to pay price paid. Producer surplus= price received mc (supply) Firms: dl = wtp = marginal revenue product of labor (mrpl) = mpl x pgood, sl = mc workers. If wage is too high, lower the amount of workers: unemployment will cause wage to go down. Supply can decrease and demand can decrease. Demand factor: blacks become substitutes for indentured servants, so slavery increased: decreases wage the indentured servants are paid. Number of years to complete contract increased. Supply factor: voyage costs fall over time, european income were rising: upward pressure on the wage: # of years to serve decreases.