ECO 12 - 12 JAN - Lecture 12 ECO 100Y5Y 12 January 2009 A....

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Lecture 12 12 January 2009 ECO 100Y5Y A. Cohen 1 E C O N O M I C S PARKIN BADE Lecture 12 12 January 2009 E C O N O M I C S PARKIN BADE Chapter 17 Demand and Supply in Factor Markets Wages, rent, interest, profits Labour, land, capital, entrepreneurial ability Expenditures services services Figure 2.8 Circular Flows in the Market Economy . Goods markets Households Factor markets Firms
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Lecture 12 12 January 2009 ECO 100Y5Y A. Cohen 2 Factor Prices and Incomes Firms hire factors of production (labour, capital, land, entrepreneurship) to produce Q Demand and supply in factor markets determine factor prices ( PF ) (wages, interest, rent) and quantities ( QF ) factor income = ( PF × QF ) factor price of entrepreneurship is normal profit economic profit / loss is residual income to firm's owners continued Figure 17.1 Demand and Supply in a Factor Market D Q 0 P, MRP S QF PF Equilibrium Factor income Labour Markets Demand for factor of production is derived demand
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ECO 12 - 12 JAN - Lecture 12 ECO 100Y5Y 12 January 2009 A....

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