Production & Labor Market
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What economic principle justifies the high salaries of some professional athletes? Suppose the manager of a baseball team wants to hire a new pitcher for $4 million per year. Under what circumstances would it make sense for the team to do so?
Assume that the government of the state of New Jersey has determined that a large number of injuries and deaths have occurred as a result of accidents involving the installation and repairs of electrical equipment at private residences. In reaction to this problem the state assembly decides to pass a law which requires that all certified electricians pass a tougher state licensing examination. Analyze the impact that this law is likely to have on the market for electricians and explain why safety may not necessarily improve.
If the market price of the good or service that a firm produces increases, what happen to the demand of labor? Explain.
Several cities across the United States have passed legislation to raise the living wage. How would this policy affect firms?
Make an argument for or against living wages in your city. Be sure to cite your references. (Note: the living wage calculator is a useful tool to determine the cost of living where you live).
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The response provides you a structured explanation of production and labor market . It also gives you the relevant references.
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Step 1
The economic principle of demand and supply justifies the high salaries of some professional athletes. The demand for highly skilled professional athletes is very high and at the same time the supply of highly skilled professionals is low. The equilibrium between demand and supply is reached at a high price (a). This justifies the high salaries of the athletes.
If the manager of a baseball team wants to hire a new pitcher for $4 million per year, the circumstances that would make the team to do so would be that the hiring of the new pitcher would increase the annual income of the baseball team by more than $4 million per year. This additional income would occur only if the baseball team hired the new pitcher. In other words the marginal revenue from hiring the new pitcher should be more than $4 million.
Step 2
If the state assembly decides to pass a law which requires all certified ...
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