00:01
So here we're starting off with two labor markets, right? we have labor market one.
00:05
A labor market is a story about wages and number of workers, story about wages and number of workers.
00:11
We have downward sloping demand, upward slope and supply.
00:15
Downward sloping demand, upward sloping supply.
00:18
Great.
00:19
No problem.
00:21
Now i'm going to imagine this is manufacturing and this is service.
00:30
Now, the question is, how do you model a union, right? i would treat a union as like having market power, right? it is like a monopoly, right? it becomes the only seller of labor, right? you work for the union.
00:48
The union controls all the supply of labor, right? so the union is a monopoly seller of labor.
00:54
And we know what monopolists do, right? they set marginal revenue equal to marginal cost.
01:00
The monopolist, in this case the union, is thinking about extracting the maximum amount of profit, the maximum amount of wage out of the employer, right? and so the monopolist wants to say, look, here's marginal revenue, where marginal revenue now is referring to how much is being paid to the workforce...