Week 10 Flashcards
(15 cards)
Define Factors of production
Inputs used to produce goods and services
Derived Demand
Derived from supply decision in another market
Demand in other market affects input demand
Labour Market
Affected by demand and supply
Most labour services are inputs
Marginal Product of Labou
The increase in the amount of output from an additional unit of labour
Diminishing marginal product of labour
The production function becomes flatter as the number of workers rise
Value of marginal product
marginal product of input x by the market price of the output also measured in dollars
Profit Maximisation
Hires workers up to the point
where marginal product of labour = wage
Labour Demand Curve
In a competitive, profit maximising firm the value-0f-marginal-product is the labour demand curve
Labour Market demand
comp firm hires labour up to marginal product = wage, then it also produces up to the point at which price = marginal cost
Labour Market Supply
Reflects how worker’s decisions about the l-l-trade off respond to changes in opportunity costs
Capital refers to
Equipment and structures used to produce goods and services
Economy’s capital represents
Accumulation of goods produced in the past that are being used in the present to product new goods and services
Purchase Price
What a person pays to own a factor of production indefinitely
Rental Price
Pays to use a factor of production for a limited period of time
Rental price of land and capital is determined by..
supply and demand
