Module 4: Labor and Financial Markets
Section outline
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The theories of supply and demand do not apply just to markets for goods. They apply to any market, even markets for things we may not think of as goods and services like labor and financial services. Labor markets are markets for employees or jobs. Financial services markets are markets for saving or borrowing.
When we think about demand and supply curves in goods and services markets, it is easy to picture the demanders and suppliers: businesses produce the products and households buy them. Who are the demanders and suppliers in labor and financial service markets? In labor markets job seekers (individuals) are the suppliers of labor, while firms and other employers who hire labor are the demanders for labor. In financial markets, any individual or firm who saves contributes to the supply of money, and any who borrows (person, firm, or government) contributes to the demand for money.
As this chapter will illustrate, we can analyze labor markets and financial markets with the same tools we use to analyze demand and supply in the goods markets.Upon completion of this module, you will be able to:- Predict shifts in the demand and supply curves of the labor market
- Explain the impact of new technology on the demand and supply curves of the labor market
- Explain price floors in the labor market such as minimum wage or a living wage
- Identify the demanders and suppliers in a financial market
- Explain how interest rates can affect supply and demand
- Analyze the economic effects of U.S. debt in terms of domestic financial markets
- Explain the role of price ceilings and usury laws in the U.S.
- Apply demand and supply models to analyze prices and quantities
- Explain the effects of price controls on the equilibrium of prices and quantities
To achieve these objectives: [Edit these items to match your resources and activities.]
- Read the Module 4 Introduction
- Read Chapter 4 in the course textbook, Microeconomics.
- Complete Module 4 Discussion.
- Complete Module 4 Quiz.
- .Complete the Module 4 Assignment
- For course instructors, list any other reading assignments here.[Include all reading assignments here that are outside of Moodle. Be as
concise as possible. More information can be included in the
third-party section below, if necessary.]
- Complete the [specific activities in the module. Include all in the order you want them completed.]
Module Pressbooks Resources and Activities
You will find the following resources and activities in this module at the Pressbooks website. Click on the links below to access or complete each item.
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Students mustMark as done
Chapter 4 of Microeconomics.
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Students mustMark as done
Module 4 In Class Activity (hide from students)
Course SLO 1: Identify the basic economic principles that serve as the foundation of economic analysis
Course SLO 3: Analyze the economic impact of government regulation, price setting, and taxes on consumers and producers
Module SLO: 4.1.3 - Explain price floors in the labor market such as minimum wage or living wage
When we hear discussions regarding policy, the phrase “living wage” often comes up. Sometimes it regards a minimum hourly wage; other times, it is used in the context of universal basic income.
As we expand this living wage discussion from a local to a nationwide discussion, we will run into some challenges. In this discussion, your task is to:
- Pick a challenge that would make it difficult to define a set “living wage” across a nation
- Explain why this challenge creates a difficulty, and the obstacles it makes to create good policy
Hint: To review minimum wage as an example of a price floor, re-read 4.1 “Demand and supply at Work in Labor Markets” and the Clear It Up discussion.
Instructor Notes with Living Wage Example:
Living wage is a phrase that is commonly mentioned by politicians and media outlets. This prompt makes a student think about what a living wage is. Is it the same in New York City as it is in the middle of Iowa? Do some people have skills that can help a dollar go further? Maybe someone with a green thumb can live with less money than a person who struggles with gardening. The difficulty could make a challenge for policy since (1) voters will not necessarily understand what others view as acceptable. In Iowa, $15/hour buys you more than $15/hour in New York City. Also, someone who is handy can probably live for less than someone who does not have those skills.
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