Econ Dev Prof sez that . . .

[Imran Siddiqui]

If wages increased in the agricultural sector during the mechanization of agriculture no labor would have ever migrated to the city and into the manufacturing sector.

Not if wages increased by a LOT more in the manufacturing section.

Oh, and increase in productivity only leads to a decrease in demand for labor if you want to stay at the same production .

[Kidlicious]

Originally posted by Imran Siddiqui

If wages increased in the agricultural sector during the mechanization of agriculture no labor would have ever migrated to the city and into the manufacturing sector.

Not if wages increased by a LOT more in the manufacturing section.

Oh, and increase in productivity only leads to a decrease in demand for labor if you want to stay at the same production .

True

[Tingkai]

Originally posted by Kidicious
The immediate effect of productivity increase is a decrease demand for labor.

Not necessarily.

The increased productivity allows the cost of a good to drop, lower price may lead to increase sales, so a company will increase production while maintaining the same amount of labour.

Alternatively, sales may remain the same because of a product's price elasticity, but the lower price means consumers have more money to spend on other products. So while demand for labour in one sector will decrease, it may increase in another sector.

But, there is also a possibility that your scenario will occur.

[Lawrence of Arabia]

This violates the laws of supply and demand. If wages increased in the agricultural sector during the mechanization of agriculture no labor would have ever migrated to the city and into the manufacturing sector.

its not violating anything. when W = P MPL, there is nothing in there that shows either demand or supply. it shows that when a worker becomes more productive he gets paid more. end of story. in micro we learn that a firm will continue hiring until marginal cost = marginal benefits of the last work. this is exactly the same thing in this case. W is marginal cost, P MPL is marginal benefits. nothing about that has demand or supply in it. it simply shows how much they will get paid.

and it seems the other guys covered the rest.

[Kidlicious]

Originally posted by Tingkai
The increased productivity allows the cost of a good to drop, lower price may lead to increase sales, so a company will increase production while maintaining the same amount of labour.

That's true, but agricultural products aren't very price elastic. Prices fall pretty quick.

Alternatively, sales may remain the same because of a product's price elasticity, but the lower price means consumers have more money to spend on other products. So while demand for labour in one sector will decrease, it may increase in another sector.

In the long run yes, but this takes time and consumers may not want more of the other products.

[Kidlicious]

Originally posted by Lawrence of Arabia


its not violating anything. when W = P MPL, there is nothing in there that shows either demand or supply. it shows that when a worker becomes more productive he gets paid more. end of story. in micro we learn that a firm will continue hiring until marginal cost = marginal benefits of the last work. this is exactly the same thing in this case. W is marginal cost, P MPL is marginal benefits. nothing about that has demand or supply in it. it simply shows how much they will get paid.

and it seems the other guys covered the rest.

You don't think the concepts of MC and MB have anything to do with supply and demand?

Your model assumes full employment. That's the mistake.

[Lawrence of Arabia]

You don't think the concepts of MC and MB have anything to do with supply and demand?

Your model assumes full employment. That's the mistake.

nope. my model assumes exogenous prices. therefore the only thing affecting wages is marginal product. there are no economic profits to be made.

marginal costs has nothing to do with supply - its the cost of producing an extra unit. marginal benefits has nothing to do with demand - its based solely on how productive a worker is.

[Kidlicious]

Originally posted by Lawrence of Arabia


nope. my model assumes exogenous prices. therefore the only thing affecting wages is marginal product. there are no economic profits to be made.

marginal costs has nothing to do with supply - its the cost of producing an extra unit. marginal benefits has nothing to do with demand - its based solely on how productive a worker is.

ooooooooh kaaaaaaay

[Tingkai]

Originally posted by Kidicious
That's true, but agricultural products aren't very price elastic. Prices fall pretty quick.

Elasticity in terms of how changing prices affect demand. In other words, the slope of the demand curve.

A large decline in the price of eggs may only create a small increase in the demand for eggs.

Originally posted by Kidicious
In the long run yes, but this takes time and consumers may not want more of the other products.

It could be an immediate effect. If the price of gas falls, then I have more money to spend on other things. I may choose to buy more chocolate bars today.

Then again, I might save more money so that I could buy an expensive item at a later date, or invest the money.

My purchasing decisions would be based on my expectation for future gas prices. If I believe that prices will stay low then I will increase spending in other areas. If I believe that price change is temporary, then I may not spend more in other areas.

[Kidlicious]

Originally posted by Tingkai



Elasticity in terms of how changing prices affect demand. In other words, the slope of the demand curve.

A large decline in the price of eggs may only create a small increase in the demand for eggs.

Exactly. That's why the demand for labor would decrease.

It could be an immediate effect. If the price of gas falls, then I have more money to spend on other things. I may choose to buy more chocolate bars today.

Then again, I might save more money so that I could buy an expensive item at a later date, or invest the money.

My purchasing decisions would be based on my expectation for future gas prices. If I believe that prices will stay low then I will increase spending in other areas. If I believe that price change is temporary, then I may not spend more in other areas.

But capacity is limited in the short run. There usually isn't enough capacity to absorb the surplus labor even if there were the demand for the products. There's the effect of the falling wages (and unemployment) on income, and expectations also have an effect.

[Shogun Gunner]

Originally posted by Tingkai


Not within this context. Economic decisions in developed nations are not based on the minimum amount of food required to keep a country alive. Instead, decisions are made on what people want rather than what they need to survive.

Depends on the definition then. If one person in a country wanted a good that wasn't produced in their home country -- that would be enough to make that country not self-sufficient.

In economics, luxury goods are just that luxuries. If required, a nation could do without them, like many have during wartime. The US could do without coffee with no one dying due to the lack of this commodity.

[Solly]

One of the worst things about doing an Economics degree is seeing crap economics all over the place and you just can't be bothered to correct them because there's a million other left-wing fools out there.

[Lawrence of Arabia]

have far through in your econ degree are you, PA? almost done, just starting, or in the middle?