Labor supply and labor demand in the keynesian model, Macroeconomics

Assignment Help:

Supply of labor, LS (W/P), depends positively on real wages in classical model. It isn't always clear which individuals are included in the labor supply. Labor supply may consist of only individuals in the workforce or it may have a wider definition including individuals which are outside the labor force though would like to work if they could find a job. The second category may comprise so-called 'discouraged workers' and individuals which are in school but who would rather work. 

Keynesian labor supply differs from classic labor supply in that it includes individuals which are outside the workforce. Thus for a given real wage, Keynesian labor supply is larger than the classic labor supply. Though Keynesian labour supply is still a positive function of the real wage. 

Demand for labor LD (W/P) is the same as for classical model. It is derived from marginal product of profit maximizing firms. Following graph illustrates the classical labor supply, Keynesian labor supply and labor demand. 

1933_Labor supply and labor demand in the Keynesian model.png

Figure: Classical and Keynesian labor supply

Note that for classical equilibrium real wage, Keynesian supply exceeds the demand. In Keynesian models, we don't presume that real wage will be equal to the equilibrium real wage. The labor market need not be in equilibrium in the classical sense. Though in the Keynesian models, real wage is such that there is always an excess supply of labor (using the Keynesian supply).


Related Discussions:- Labor supply and labor demand in the keynesian model

solow model, critically explain solow model of economic growt

critically explain solow model of economic growth

Standard model, Please explain each of the following terms and explain how ...

Please explain each of the following terms and explain how each is used in the standard model. 1. Iso value line's 2. Production possibilities frontier 3. Indifference curve. You w

Taxation, with reference to incidence of taxation, explain with the help of...

with reference to incidence of taxation, explain with the help of a diagrams, who bears the incidence of taxation when the demand for a commodity is (i)perfectly inelastic (ii) uni

Determine the experimental design, An ecologist is interested in the possib...

An ecologist is interested in the possible negative effects of marinas and boat mooring areas on the abundances of fish. Having read Hurlbert's paper about pseudoreplication, he de

Control of ochratoxin, Q. Control of ochratoxin? Control: Once ochratox...

Q. Control of ochratoxin? Control: Once ochratoxin A has been formed in a food, it is difficult to remove by most forms of food processing. Cooking with or without previous soa

Artificial intelligence and neural networks, Problem >> Explore the rel...

Problem >> Explore the relationship between Artificial intelligence and Neural networks. The systems which use this type of intelligence are known as artificial intelligent

Microsoft and standard oil, In what major way do the Microsoft and Standard...

In what major way do the Microsoft and Standard Oil cases differ?

Using a different method colleagues different solution, Consider the follow...

Consider the following homogenous difference equation: xt=b0+b1xt-1 a) Iterate backwards xt can be written in terms of xt-2. b) Now show xt can be written in terms of xt-3 a

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd