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13 Cards in this Set
- Front
- Back
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What determines the prices paid to workers, landowners and capital owners?
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their supply and demand
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factors of production
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the inputs used to produce goods and services
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Three most important factors of production
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Labor, land, and capitial
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Elements of a typical firm
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- competitive; many players in the market, so a single firm has little influence on the price it gets for apples/the wage of apple pickers
- profit maximizing; the firms supply of apples and its demand for workers are derived from its primary goal of maximizing profit |
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Equation for PROFIT
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Total revenue - Total Costs = profit
TR - TC = profit |
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production function
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the relationship between the quantity of inputs used to make a good and the quantity of output of that good
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marginal product of labor
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the increase in the amount of output from an additional unit of labor
MPL = change in Q / change in L |
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diminishing marginal product
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the property whereby the marginal product of an input declines as the quantity of the input increases
as more workers are hired, the less each person contributes to production |
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value of the marginal product
aka the marginal revenue product |
the marginal product of input (labor) times the price of the output
VMPL = MPL x P |
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How many workers do competitive profit maximizing firms hire?
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the hire workers up the the point where the value o the marginal product of labor equals the wage
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the value of the marginal product curve is also...
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the labor demand curve.
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what may cause the labor demand curve to shift?
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- the output price
- technological change - the supply of other factors |
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what may cause the labor supply curve to shift?
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- changes in taste
- changes in alternative opportunities - immigration |
