Chapter+18+JK+&+JJ

=__The Markets for the Factors of Production__=

=The Demand For Labor= Firms turn into buyers and Households turn into Sellers __The Competitive Profit-Maximizing Firm__ Firms are 1. Price Taker 2. Does not directly care about the quantity of workers or the numbers of apples it produces. It only cares about the profit __The Production Function and the Marginal Product of Labor__ production function -the relationship between the quantity of inputs used to make a good and the quantity of output of that good --important because it determines how much profit the firm makes Marginal Product of Labor -the increase in the amount of output from an additional unit of labor for every time you hire another input and you do not get less than double the quantity you have diminishing marginal product(assuming that you only had one worker from the start). __The Value of the Marginal Product and the Demand for Labor__ - the marginal product of an input times the price of the output. Marginal revenue product is the extra revenue the firm gets from hiring an additional unit of a factor of production __What causes the labor-demand curve to shit?__ Output price Technological Change The Supply of Other Factors =The Supply of Labor= __Trade-off between Work and Leisure__ Increase in the wage induces workers to increase the quantity of labor they supply.(use the fundamental ten principles to understand better) __What causes the Labor-Supply Curve to Shift?__ Change in Tastes Change in Alternative Opportunities Immigration =Equilibrium in the Labor Market= wages adjust to balance the supply and the demand for labor The wage equals the value of the Marginal Product of Labor __Shifts in Labor Supply__ Like the basic economics we've learned when supply increase price goes down, and in this case price is the wage of the worker. __Shifts in Labor Demand__ By also using basic economic knowledge, you know that increase in demand will increase wage and increase employment which is the Quantity of the graph =Other Factors of Production: Land and Capital= capital - the equipment and structures used to produce goods and services __Equilibrium in the Markets for Land and Capital__ purchase price of land or capital VS the rental price purchase price of land or capital is buying the factor of production rental price is the price payed to use the factor of production for a limited time __Linkage among the Factors of Production__ B/c of diminishing marginal product, a factor in abundant supply has low MP and a low price and a factor in scare supply is exactly the opposite. It has a high MP and a high PRICE.

CH18 Key Terms factors of production: the inputs used to produce goods and services production function: the relationship between the quantity of inputs used to make 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 whereby the marginal product of an input declines as the quantity of the input increases value of the marginal product: the marginal product of an input time the price of the output capital: the equipment and structures used to produce goods and services