ECON 5311 chapter 11, 12, 13, 14

ECON 5311 chapter 11, 12, 13, 14 - LECTURE SESSION SIX It...

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LECTURE - SESSION SIX It is common knowledge that people tend to get ugly if they feel that their source of income is jeopardized. One of my favorite Bible stories is about Paul and Silas in Macedonia. (Acts 16:16 - 38) They were preaching the gospel followed by a servant girl who was the local Psychic Network and because Paul was "troubled" after several days, he cast the devil out of her. The family and the community became more troubled. They stripped, beat, and imprisoned the pair because "their hope of making money was gone." I read once that a lady sued a hospital because she lost her psychic ability due to a catscan and was awarded $1.5 million (in California). The chapters in this session illustrate that the demand for resources is derived from the demand for the products that they produce, and the supply of resources depends upon the price versus the opportunity cost of the resources. The two topics covered in the principles courses on macroeconomics and microeconomics are completed. Chapters 24 through 32 are used to reinforce the concepts learned in earlier chapters and offer some perspective on the international economy and global economic issues such as world poverty and development. CHAPTER 11 - RESOURCE MARKETS A firm demands additional units of a resource as long as the marginal revenue generated by each additional unit exceeds the marginal cost. A resource owner will supply additional units of the resource as long as doing so increases his or her utility. Remember that rational economic behavior for individuals (who supply resources) is to maximize utility (satisfaction) and rational economic behavior for firms is to maximize profit. DERIVED DEMAND - The demand for a resource is derived from the demand for the product the resource produces. This is based on the demand-side notion that it is aggregate demand (GNP) that drives the economy and that countercyclical policies to avoid unemployment and inflation are effected by regulating aggregate demand. Like the demand and supply for final goods and services, the demand and supply for resources depend on the willingness and the ability of buyers and sellers to participate in market exchange. Resources tend to flow to their highest-valued use. Whereas temporary differentials spark the movement of resources away from lower-paid uses toward higher-paid uses, permanent price differentials cause no such reallocations. ECONOMIC RENT - The portion of a resource's total earnings above its opportunity cost; earnings above the amount necessary to keep the resource in its present use. The enjoyment of profits by the owners of capital were, according to Marx, exploitation of the economic rents earned by workers. The less elastic the resource supply, the greater the economic rent as a proportion of total earnings. See exhibit.
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