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The formal statement of the equilibrium condition of the Harris–Todaro model is as follows: [2] Let be the wage rate (marginal productivity of labor) in the rural agricultural sector. Let be the total number of jobs available in the formal urban sector.
This is a corner solution as the highest possible IC (IC 2) intersects the budget line at one of the intercepts (x-intercept). [1] In mathematics and economics, a corner solution is a special solution to an agent's maximization problem in which the quantity of one of the arguments in the maximized function is zero. In non-technical terms, a ...
Since the optimal mix of input levels depends on the wage and rental rates, these rates are also arguments of the conditional demand functions for the inputs. This concept is similar to but distinct from the factor demand functions, which give the optimal demands for the inputs when the level of output is free to be chosen; since output is not ...
These supply and demand curves can be analysed in the same way as any other industry demand and supply curves to determine equilibrium wage and employment levels. Wage differences exist, particularly in mixed and fully/partly flexible labour markets. For example, the wages of a doctor and a port cleaner, both employed by the NHS, differ greatly ...
General equilibrium theory both studies economies using the model of equilibrium pricing and seeks to determine in which circumstances the assumptions of general equilibrium will hold. The theory dates to the 1870s, particularly the work of French economist Léon Walras in his pioneering 1874 work Elements of Pure Economics . [ 2 ]
In labour economics, Shapiro–Stiglitz theory of efficiency wages (or Shapiro–Stiglitz efficiency wage model) [1] is an economic theory of wages and unemployment in labour market equilibrium. It provides a technical description of why wages are unlikely to fall and how involuntary unemployment appears.
Next, we transform this linear programming problem into a general equilibrium problem, with the following assumptions: (1) There are 4 types of goods in the economy (i.e., the product and 3 primary factors) and 4 economic agents (i.e., 3 firms and 1 consumer). (2) Firms use primary factors as inputs to produce the product.
For example, economic rent can be ... the wages of a member of the guild would be set so that the expected net return on the investment in training would be just ...