CHAPTER+18-SSJJ

=__The Markets for the Factors of Production__= media type="youtube" key="BzjfvnSbaFM" height="344" width="425"

What is a factor of production anyways?
They are the inputs used to produce goods and services. Land, labor and capital are the three most important factors of production. The demand for a factor of production is known as a derived demand. What this means is that, a firm's demand for a factor of production is DERIVED from it's decision to supply a good in another market.

The Demand for LABOR
We're going to make TWO assumptions when learning about the demand for labor. First, firms are always in a competitive market, whether they are in the product market, or the factor of production market. Second, a firm is always profit-maximizing.

Production Function is....
The relationship between quantity of inputs and the quantity of outputs. Marginal product of labor is the amount of output that is increased by one additional unit of labor. Diminishing marginal product is when the marginal product of an input declines as additional inputs are used.

The Value of Marginal Product
MP X P of product demand

**OUTPUT PRICES!** The value of the marginal product changes with the output prices. This causes a shift in the labor-demand curve which means if the price decreases, firms can't pay high wages.

**TECHNOLOGY!** The invention of new machines increases the demand.

**SUPPLY OF OTHER FACTORS!** If there is less supplies, than the workers can't work efficiently.

**THE SUPPLY OF LABOR!** This is the trade off between work and leisure! This is one of the more common trade-offs people will have to decide on. ( A higher wage makes the opportunity cost of leisure higher.)



What causes the Labor-SUPPLY curve to shift?
 **CHANGE IN TASTE!** Like the number of women workers.

 **CHANGE IN ALTERNATIVE OPPORUNITIES!** Workers have the decision to change to another job.

 **IMMIGRATION!** More workers, more labor.

Other Factors of Production

 * CAPITAL**: equipments that are used to produce the good
 * Equilibrium**: the point where the calie of the MARGINAL PRICE of each factor = PRICE of each factor