Chapter 18 Notes

Chapter 18 Notes - Chapter 18 The demand for a factor of...

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Chapter 18 The demand for a factor of production is a derived demand, it comes from a firms decision to supply a good and is driven by the demand for that good Production function- the relationship between the quantity of inputs and the quantity of the good produced Marginal product of labor- increase in output for an increase in labor Diminishing marginal product exitsts VMPL- value of the marginal product of labor aka marginal revenue product =the price x the marginal product of labor a measure of the increase in revenue for each marginal worker decreases with more workers because the MPL decreases w/ law of diminishing returns VMPL < W inefficient VMPL > W inefficient Because of this, the VMPL graphed on a VMPL vs. quantity of apple pickers is the demand for labor curve Reasons the VMPL curve might shift out Price increase of the good they produce Technology change Labor augmenting (more labor can work efficiently) labor demand curve shifts right vs. labor saving (decreases the VMPL of a worker ie robots) labor demand
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