Chapter 11: Input Markets (Labor) Labor Market Who represents supply? -Workers Who represents demand?

-Employees Wage: Price of Labor (Vertical) Employment: Quantity of Labor (Horizontal) Unemployment: Surplus of Labor (S > D) Labor Vs. Leisure Reservation Wage: the lowest wage for which you are willing to work (always changing) Work more hours? -Substitution Effect -More money = more hours -Less money = less hours -Income Effect -More money = less hours -Less money = more hours -Both effects go through everyones mind -Backward bending individual labor supply (see picture 1) -Labor Market curve is positive all the way through -Labor Supply Factors: (change willingness to work) -Demographics -Non-money aspects (quality of job)

-Wages in other jobs (substitutes) -Non-wage income (stock market, grandma leaves $) -Demand for a labor is a derived demand: Marginal Revenue Product: Added production from hiring one more worker x product price -Labor Demand Factors: -Demand for goods -Productivity -Prices of other inputs (Substitutes) Labor Market Equilibrium: -Consumer confidence falls (decrease in wages & quantity) (pic 2) -Stock market recovers (decrease in supply, wages increase) (pic 3) -Immigration laws tighten (decrease in supply) Causes of Unemployment: (pic 4) -Sticky wages: wage doesnt change with changes in economy -Efficiency wages: some companies like paying workers more money so they can be more loyal or create prestige (Athletes) -Compensating differentials: how are wages set for conditions of the work (Beach Chair Guy vs. Sewer Cleaner) (Tips) -Collective bargaining (Unions): successful at forcing wages higher than equilibrium Imperfect Labor Markets: -Causes lower employment and lower wages, why? 1. Through Market power: firms produce less and hire fewer people, results in lower wages (monopolistic exploitation) 2. Through Monopsony: firm is the only employer in town or the industry. Pays less than what workers are worth. (Ex. Military or small factory town) (MFC higher than supply curve) (pic 5&6) (monopsonistic exploitation)

Chapter A1: Economics of Health Care (pic 7&8) Health Care and the Deficit: Types of Health Care: -Preventative Care: any sort of treatment you do to reduce the risk of illness (you do when your healthy) (physical, vision, & dental) -Specialty Care: any type of treatment that takes place after you are diagnosed with an illness (prescription drugs, E.R. & surgeries) -Elective Care: any treatments that are not necessary for your physical health (laser eye, cosmetic, & fertilization surgeries) Healthcare Demand Factors (what shifts it): -Age and Population -Income and Wealth -Third-Party Insurance -Socioeconomic Factors (cultural) (football players) -Medical Tourism Healthcare Supply Factors: -Health Labor Market (number of doctors) -Health Care for Profit (how insurance companies manage their industry) (gov. regulations) -Health Technology (HIV treatment = reducing cost) (in US increased costs due to increased demand) (hip replacements) -Medical Malpractice (states have different laws) (cap lawsuits) (shifts left) -Waste and Fraud (shifts left) Universal Health Care: a tradeoff between quality and quantity -how do you define quality?

-5 Different Health Care Systems -Government-run: England (every Dr. is government employee) US (Doctors in the Military) (No Private Market) -Single-Payer: Medicare (Doctors independent but Government Pays) (Canadian Medicare system) (Medicare for whole country) -Two-Tier: Everyone has a basic free health care (popular in Europe) (have to pay Private for better procedures) -Managed Competition: private Dr.s, private insurance companies, but operate within gov limits -Market-Based: run like any other market for services (No Government Control) (botox surgery) Does Culture Influence Obesity? -BMI = Weight (kg) / Height (m2) -Only Americans eat on the go -Triple Whopper With Cheese: 1,230 calories -Fast food vs. Slow food? -Plate size has expanded 2.5 inches -Placement of snacks in grocery stores -California towns banning Drive-Thrus Externalities & Market Failure -Health Externalities (not passing on illnesses & families happier) -Free Rider Problem (hard to exclude people from taking food) -Unpaid Hospital Bills Effects of the Uninsured -50 million Americans Uninsured -100 billion in unpaid bills -Results in $400 an extra cost per insured person

-Obama Act (pic 10&11) -Rescission: cant drop insurance if you get sick

Debatable Issues of the Act: -unknown cost of the new law -can the gov force you to buy something you dont want? -more rules on medical malpractice -What happens to Medicare/ Medicaid

Chapter 2A: Global Networks -Interconnection: physical linking of one network to another (cell phone companies) (international mail service) -Nigerian phone companies (no interconnection) Network Effect: -An increase in value of a good as more people use it (email, fax machine, & facebook) -A decrease in the value of a good as fewer people use it 3 Types of Networks: -Physical Networks (connected by satellites, GPS, fiber optics, or by airlines) -Virtual Networks (connected by usage & popularity) -Social Networks (connected by usage and via personal connections) (combination of other 2, gym, facebook) Network Good: A good that depends on the existence of a network Virtuous Cycle vs. Vicious Cycle: -Virtuous Cycle: type of good in which the popularity increases without the firm advertising (purely by work of mouth) -Vicious Cycle: when something stops becoming popular, company worries and over advertises to stay in business Deriving a Network Demand Curve: -Start with a small network with fixed capacity -As network expands, demand increases -Network expansion with network effects (pic 12) -Network demand curve (pic 13) -B is most important point (tipping point) -Quantity of a product that determines whether product will take off or fail: tipping point

Core Users- Beginning to point C Casual Users- Come after a good peaks (wait till price goes down) (you depend on price) Examples of Network Demand Curves: -New rock band -New software -New tech gadget How do firms protect their network goods from competitors? -Teaser Strategies: sign-up deals to lure new customers (credit cards) -Lock-In Strategies: making it costly for customers to leave the network (contract cancellation fees) -Versioning: Intertemporal Pricing: Creating multiple goods based on consumer patience) (Pic 15) (In Theatre, Pay-Per-View, Rental, TV) -Versioning: Peak-load Pricing: creating multiple goods based on level of usage -Versioning: Bundling: creating multiple goods by combining various goods (Microsoft Office Package) (Value Meals) The Oprah Effect: 40 million followers -Anything she says can make or break a product -Restaurants, I-pad, No meat