Liam, thank you so much for this informative video. I just want to ask regarding the bridge between the employment rents and the worker's effort curve - does the MRT of the worker take into account the increasing employment rent into consideration as well with every increase in wage? Could this also be part of the reason why the MRT is steeper at first until it reaches a point where the diminishing productivity of labour sets in?
The concavity really comes from an assumption about the increasing cost of effort. If we think about employment rent, we defined it as the wage - disutility of effort - reservation wage. The wage is linear and the reservation wage is fixed, so the reason the Best Response Curve is concave is because of the disutility of effort is convex.
literally a lifesaver, my professor is useless, i'm so thankful you exist!
Sir, you are saving my semester. Thanks for this
Well explained Liam!
Thank you this helped a lot :)
Liam, thank you so much for this informative video. I just want to ask regarding the bridge between the employment rents and the worker's effort curve - does the MRT of the worker take into account the increasing employment rent into consideration as well with every increase in wage? Could this also be part of the reason why the MRT is steeper at first until it reaches a point where the diminishing productivity of labour sets in?
The concavity really comes from an assumption about the increasing cost of effort. If we think about employment rent, we defined it as the wage - disutility of effort - reservation wage. The wage is linear and the reservation wage is fixed, so the reason the Best Response Curve is concave is because of the disutility of effort is convex.
Thank you so much for the response! I’ve probably used about 20 of your videos now for revision and it’s been a blast. Will subscribe!