Demand-Enhancement ModelExclusive or Craft Union Model Inclusive or Industrial Union Model
© 2013 McGraw-Hill Ryerson Ltd. Chapter 14, LO4 1
Wag
e R
ate
(D
ollars
)
Quantity of Labour
Wu
Qc Qu
Wc
D1
D2
S
IncreaseIn Demand
LO4 13-2
Union can increase product demand by altering price of other inputs
© 2013 McGraw-Hill Ryerson Ltd.
Chapter 14uu, LO42
Effectively reduce supply of labor Restrict immigration Reduce child labor Compulsory retirement Shorter workweek
Exclusive unionismOccupational licensing
LO4 13-3
© 2013 McGraw-Hill Ryerson Ltd. Chapter 14, LO4 3
Wag
e R
ate
(D
ollars
)
Quantity of Labour
D
S1
Qc
Wc
S2
Wu
Qu
DecreaseIn Supply
LO4 13-4© 2013 McGraw-Hill Ryerson Ltd. Chapter 14, LO4 4
Union controls the labour supply
Wag
e R
ate
(D
ollars
)
Quantity of Labour
D
S
Qc
Wc
Wu
Qu Qe
a be
LO4 13-5© 2013 McGraw-Hill Ryerson Ltd. Chapter 14, LO4 5
Are unions successful? Wages 15% higher on average
Consequences: Higher unemployment Restricted ability to demand higher
wages
LO4 13-6
© 2013 McGraw-Hill Ryerson Ltd. Chapter 14, LO4 6
Monopsony and inclusive unionism
Single buyer and sellerNot uncommonIndeterminate outcomeDesirability
LO4 13-7
© 2013 McGraw-Hill Ryerson Ltd. Chapter 14, LO4 7
LO4
Wag
e R
ate
(D
ollars
)
Quantity of Labour
D=MRP
S
Qc
Wc
Wu
Qu=Qm
MRC
Wm
a
13-8
© 2013 McGraw-Hill Ryerson Ltd. Chapter 14, LO4 8