Chapter+18+Markets+for+the+Factors+of+Production+(Joon,+Scott,+and+Steven)

Key Terms
 * Factors of Production:** the inputs devoted to producing goods/services
 * Production Function:** the relationship between the quantity of inputs used to produce a good and the quantity of output of that good.
 * Marginal Product of Labor:** the increase in the amount of output from an additional unit of labor.
 * Diminishing Marginal Product:** the property in which the marginal product of an input decreases as the quanity of the input increases.
 * Value of the Marginal Product:** the marginal product of an input multiplied by the price of the output
 * Capital:** the equipment and system used used produce good/service.

Intro: This chapter is relevant to everyone as people find jobs. This chapter discusses how supply and demand for labor, land and capital determine the prices paid to workers, landowners, and capital owners. The factors of porduction is used to produce goods and services.

Demand for Labor
To make a hiring decision, firms considers how the size of its work force effects the amount of output produced. > Economists also take in the accont of diminishing marginal product. At some point, increasing the number of labor can hurt the output. > > > > > *A competitive, profit-maximizing firm hires workers up to the point where value of the marginal product equals the wage.
 * Production function is used to describe the relationship between the quantity of inputs and the quantity of outputs.
 * Marginal product of labor: th increase in the amount of output from an additional unit of labor

Labor-Demand Curve Shift
> Increase in price= increase in demand for labor > Decrease in price= decrease in demand for labor > Two Possible outcomes: demand increases because the technology increased the marginal product or demand decreases because technology can do the ob previously done by laborers.
 * The Output Price: The value of marginal product is marginal product times the price of the firm's output. The changge of out price means there is change in the value of marginal product.
 * Technological Change

Supply of Labor
Trade-off between Work and Leisure: When you take an hour of leisure, you lose the hour of wage.

**Shift in Labor**

 * Changes in Taste: A great example is change in views about women. Women now can work, which means supply in labor increase
 * Changes in Alternative Opportunity: when other better opportunities come, laborers move to better opportunities, therfore, the firm losing the laborers.
 * Immigration: immigrants need jobs to survive. They work for firms, which increases the supply of labor.

Equilibrium in the Labor Market
Anything that changes the supply or the demand for labor must change the equilibrium wage and the value of the marginal product by the same amount.
 * Wage adhusts to balance the supply and demand for labor.
 * the wage equals the value of the marginal product of labor.

Land and Capital
Demand for Land and Capital is same as demand for labor. The firm hires land capital until the value of the facotr's marginal product equals the factor's price.
 * Land, labor, capital each earn the value of their marginal contribution to the production process.

Conclusion: This chapter explained how labor, land, and capital play roles in the production process. We see the pattern of "everyone is born greedy" in the production process as well. The wages of the laborers reflect the market prices of the goods that they produce.

Student Produced Resource: [|Quizlet Chapter 18]