(BTY)+Chapter+18

=The Markets for the Factors of Production =

When a market is ran by people, there are necessary inputs they need to do so. Labor to work for them, capitals the labor and company uses to do the work, and land to work. Therefore, the demand for such inputs are derived by firms, so that they can supply their own goods to the market.

=The Demand for Labor =

Two assumptions
- Firms are always competitive in markets, whether they’re in the product market or the factor of production market. - Firms are all profit-maximizing the versatility of supply and demand. (text book page 395)

=Production function =

- relationship btw Q of inputs and Q of outputs. - marginal product of labor: the amount of output increased by one labor - diminishing marginal product: MP of an input declines as additional input is used.

=The Value of Marginal Product =

- value of marginal product: MP x price of product demand

=What Causes the Labor-Demand Curve to shift? =

- Output prices: when the output price changes, the value of the MP changes as well, which shifts the labor-demand curve. - Technological Change: labor saving changes->left/ labor augmenting changes->right - The supply of other factors: The quantity available can change its MP and value.

=The Supply of Labor = http://static.howstuffworks.com/gif/labor-union-7.jpg

The trade-off btw work and leisure
- people always face trade-off btw these two. - increase in the wage makes workers to increase Q of labor they supply-> upward sloping S - higher W means the opportunity cost of leisure is high-> downward sloping S might occur.

=What causes the labor-supply curve to shift? = - changes in tastes: increase in # of women workers - changes in alternative opportunities: workers might change their jobs of better benefits. - immigration: more labor

=Other factors of production: Land and Capital = - Capital: equipment and others used to produce a good. - Equilibrium is where the value of marginal product of each factor equals the price of each factor.

Questions 1. Is labor a factor of production? (T/F) 2. Immigration does not affect the supply curve of labor (T/F) 3. Diminishing marginal product occurs in the market of labor (T/F)

Answers 1. T 2. F-it does 3. T