Microeconomists Generally Do Not Expect to See Excess Supplies in Most

question 51

Essay

Microeconomists generally do not expect to see excess supplies in most markets. However, macroeconomists will often observe that during recessions the quantity of labor supplied can exceed the quantity of labor demanded. Explain what macroeconomists are referring to and explain why the wage rate may not adjust right away.

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Definitions:

Predetermined Overhead Rate

The rate used to assign overhead costs to products or services based on a predetermined formula.

Fixed Component

The portion of total costs that remains constant, regardless of changes in activity level.

Variable Overhead

Costs of production that vary with the level of manufacturing activity or output, such as utilities and commissions, as opposed to fixed overhead costs.

Rate Variance

The difference between the actual rate paid for inputs and the standard rate expected, often related to labor or manufacturing overhead.