NeoClassical and Old classical comparison
Neo classical economist’s each view the economy different, they each for example reside on different aspects of supply and demand that make the price in market. However the labor market is completely different from other markets. Maybe the most important of these differences is in the function of supply and demand. If the price of a certain item were high there would be a normal thing for it to be in the long run for more goods to be produced until the satisfaction of that good is completely obtained. With labor, the supply cannot be effectively manufactured because people have a limited amount of time in the day and people are not manufactured.
Households are generally considered the supplies of labor. In theory, people are usually presumed as rational and seeking to maximize their utility function. In labor market, their utility function is determined by the choice between income and leisure. However they are always constrained by the working hours available to them. The first graph displayed shows the trade-off between using all your time between leisure activates and income generating activates. The linear line illustrates that there are only twenty-four hours a day and individuals must choose, how much time they must use to allocate them into leisure time and income generating activities. This usually is referred as the indifference curve. The curve indicates the combinations of leisure and work that will give individual a specific level of utility. The highest point is a tangent, which is a constraint line showing the short run equilibrium for this supplier of labor services. The reason to why the supply curve is upward is because as the price increases suppliers are willing to produce more of the good, if it is low then it would be the opposite.
Neoclassical economist will also like to know the maximum quantity of hours an employer will demand at every wage rate. To better get...