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Lecture 20 - Conference on opportunities in financial...

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1 Conference on opportunities in financial sector Saturday, March 1 Register and more information at http://uisconference08 .wordpress.com/ Chapter 17: Markets for factors of production A. Demand for labor B. Supply of labor C. Trends in labor markets D. Labor market imperfections E. Market for capital [Note: final exam won’t cover appendix to Chapter 17] F. Land prices Consider farmer’s decision to rent more land If I rent 1 more acre, holding constant my current capital (tractors, equipment) and labor, how much would my revenue increase? acres of land rent ($/acre) marginal revenue product for land = demand for land
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2 acres of land rent ($/acre) demand for land supply of land But supply of land is fixed equilibrium rental rate But what happens over time when population increases and income per person goes up due to productivity gains? acres of land rent ($/acre) demand for land (1990) supply of land Will Rogers-- buy land, they aren’t making any more of the stuff equilibrium rental rate (1990) demand for land (2000) equilibrium rental rate (2000) Long run equilibrium: one might expect land prices to go up at rate of growth of economy
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