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