Macro Module 6 HW

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NEAS	NEAS posted 14 Years Ago #9290 #
Supreme Being Group: Administrators Posts: 4.3K, Visits: 1.3K	Macroeconomics, Module 6: Markets, Prices, Supply, and Demand Homework Assignment: Actuarial Labor (The attached PDF file has better formatting.) [The following homework assignment reviews the microeconomics of the labor market.] The labor market for actuaries is in equilibrium in 20X1. In 20X2, insurance regulators require all insurers to provide an enterprise risk management report signed by a Fellow of the SOA or CAS evaluating the risks facing the insurer. A. In the short run, does the supply curve for actuaries change? B. Does the demand curve for actuaries change? C. What happens to the real wage rate for actuaries? D. What happens to the market quantity of actuarial labor? E. Actuaries are a small part of the total labor force. In future years, as college graduates decide on careers, how does the supply curve for actuaries change? Part A asks about the supply curve, not the quantity supplied. If an actuary works overtime, or an actuary comes out of retirement to do an ERM report, the quantity supplied changes, not the supply curve. Both Landsburg and Barro distinguish the supply curve from the quantity supplied. Part B asks: At a given price for actuarial labor, does the number of jobs increase, decrease, or stay the same? Even if the supply curve for actuaries does not change, insurers need more actuaries to satisfy the new regulations. Upon reviewing your completed homework assignment, you notice that 1. More actuaries are working (or working more hours) in 20X2 than in 20X1. 2. Actuaries are earning higher wages in 20X2 than in 20X1. 3. Wages reflect the marginal product of labor. You might infer an increasing marginal product of labor for actuaries, since the greater quantity supplied of actuarial labor has a higher marginal product. Is this conclusion correct? Why or why not? Attachments Macro Mod 6 HW.pdf (2K views, 28.00 KB) 0
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palantathraiel	palantathraiel posted 12 Years Ago #11720 #
Junior Member Group: Forum Members Posts: 8, Visits: 45	I have a question about the last part of this homework. In market-clearing conditions (in this case, I suppose this is in the short run), the real wage rate is equal to the marginal product of labor. Since the real wage rate rises in the short run, MPL should also rise. However, MPL is also the change in output per unit change in labor, and I was thinking that there is no direct relationship between the change in output and the change in labor. That is, MPL might be increasing, decreasing, or there may be no change at all. Where am I going wrong here? [NEAS: Consider a simpler and clearerexample. Suppose a plastic surgeon moves to a country where plastic surgery isillegal. The plastic surgeon moves there for the nice weather, not for careerprospects. Few people seek plastic surgery, so the marginal product of laborfor the plastic surgeon is low. If the government of the country changes thelaws to allow plastic surgery, more people want plastic surgery, the surgeon’smarginal product of labor increases, and the wage rate for the surgeonincreases. Thishomework assignment is similar. Suppose a consulting actuary specializes in ERMstudies. If regulators do not ask insurers to provide ERM studies, the actuary’smarginal product of labor is low. If the regulation changes and all insurersmust provide ERM studies, the actuary’s marginal product of labor increases. The moralis that labor has no intrinsic value. Karl Marx taught that labor has intrinsicvalue, and workers should be paid this value. Western economics says that thevalue of labor depends on the demand for the labor. A construction worker inSpain or Ireland in 2012 has low marginal product of labor, since housingbubbles in these countries created excess buildings. The same constructionworker in Poland or Germany has high marginal product of labor, since demandfor new housing is strong. Anything which changes demand for the good orservice changes the marginal product of labor producing the good or service.] Edited 12 Years Ago by NEAS 0
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NEAS	NEAS posted 6 Years Ago #16099 #
Supreme Being Group: Administrators Posts: 4.3K, Visits: 1.3K	+x palantathraiel - 6/28/2012 6:54:15 AM I have a question about the last part of this homework. In market-clearing conditions (in this case, I suppose this is in the short run), the real wage rate is equal to the marginal product of labor. Since the real wage rate rises in the short run, MPL should also rise. However, MPL is also the change in output per unit change in labor, and I was thinking that there is no direct relationship between the change in output and the change in labor. That is, MPL might be increasing, decreasing, or there may be no change at all. Where am I going wrong here? [NEAS: Consider a simpler and clearerexample. Suppose a plastic surgeon moves to a country where plastic surgery isillegal. The plastic surgeon moves there for the nice weather, not for careerprospects. Few people seek plastic surgery, so the marginal product of laborfor the plastic surgeon is low. If the government of the country changes thelaws to allow plastic surgery, more people want plastic surgery, the surgeon’smarginal product of labor increases, and the wage rate for the surgeonincreases. Thishomework assignment is similar. Suppose a consulting actuary specializes in ERMstudies. If regulators do not ask insurers to provide ERM studies, the actuary’smarginal product of labor is low. If the regulation changes and all insurersmust provide ERM studies, the actuary’s marginal product of labor increases. The moralis that labor has no intrinsic value. Karl Marx taught that labor has intrinsicvalue, and workers should be paid this value. Western economics says that thevalue of labor depends on the demand for the labor. A construction worker inSpain or Ireland in 2012 has low marginal product of labor, since housingbubbles in these countries created excess buildings. The same constructionworker in Poland or Germany has high marginal product of labor, since demandfor new housing is strong. Anything which changes demand for the good orservice changes the marginal product of labor producing the good or service.] 0
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