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Value of the Marginal Product

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

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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 people’s 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 don’t 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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