UNIT 10 Flashcards
(20 cards)
when does a profit maximizing firm hire workers up to?
to the point where the value of the marginal product of labour equals the wage.
what is the labour demand curve?
it reflects the value of the marginal product of labout.
what causes the labour supply curve to shift?
changes in taste, changes in alternative opportunities, immigration
what causes the labour demand curve to shift?
change in product demand, change in productivity, change in prices of inputs, technological change, government regulations
how is the wage determined in a competative market?
- wage adjusts to balance the supply and demand for labour
- the wage equals the value of the marginal product of labour
what are the characterisitics of a perfectly competative labour market?
many small firms are hiring workers, many workers with identical skills, wage is constant, workers are wage takers
what is demand for labour?
demand is the different quantities of workers that businesses are willing and able to hire at different wages
what is the law of demand for labour?
there is an inverse relationship between wage and quantity of labour demanded
what is supply for labour?
supply is the different quantities of individuals that are willing and able to sell their labour at different wages
what is the law of supply for labour?
there is a direct (or positive) relationship between wage and quantity of labour supplied
what are the four factor payments?
rent, wages, interest and profit
why is the demand for labour downward sloping?
the law of diminshing marginal returns
why is supply for labour upward sloping?
The supply of labour is upward sloping because, as the wage rate increases, more individuals are willing to work or work more hours.
what are the shifters of resource demand
changes in demand for the product, changes in productivity of the resource, changes in price of other resources
what are shifters of resource supply?
change in number of workers, government regulation and liscencing, personal value towards leisure time
what happens in a perfectly competative labour market?
the MRC equals the wage set by the market and is constant
how do you find marginal resource cost?
change in total cost divided by change in inputs
what is the marginal revenue product?
the additional revenue generated by an additional worker
what happens in a perfectly comeptative product market?
MRP equals the marginal product of the resource times the price of the product
when should firms continue to hire?
until MRP = MRC
