Value of the Marginal Product

Value of the Marginal Product - Changes in supply of other...

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Value of the Marginal Product (VMP)- VMP is the additional revenue generated by the employing one more unit of a variable input. Revenue is the money the firm receives from the sale of its product VMP Defines what a firm would be willing to pay for additional units of an input Output Price x Marginal Product Firm’s Factor (input) Demand is the Firm’s VMP curve Only a movement along the curve when input price increases or decreases A shift in the curve when output price increases or decreases; or a change in technology shifts it out as well
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Unformatted text preview: Changes in supply of other factors (fixed inputs) Factor Supply What determines peoples willingness to supply factors of production? Example of labor supply: Supply of labor depends on willingness to trade work for leisure Backward bending supply curve- at a point you realize you dont need to work as much Shifts in Labor Supply Curve Changes in preferences/norms (women in the workforce) Change in population Changes in Wealth Changes in employment opportunity...
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This note was uploaded on 03/30/2008 for the course AAEC 1006 taught by Professor Mjellerbrock during the Spring '07 term at Virginia Tech.

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