398PART SIXTHE ECONOMICS OF LABOR MARKETSlandowners higher rental income than others, and some capital owners greaterprofit than others? Why, in particular, do computer programmers earn more thangas station attendants?The answers to these questions, like most in economics, hinge on supply anddemand. The supply and demand for labor, land, and capital determine the pricespaid to workers, landowners, and capital owners. To understand why some peo-ple have higher incomes than others, therefore, we need to look more deeply atthe markets for the services they provide. That is our job in this and the next twochapters.This chapter provides the basic theory for the analysis of factor markets. Asyou may recall from Chapter 2, the factors of productionare the inputs used toproduce goods and services. Labor, land, and capital are the three most importantfactors of production. When a computer firm produces a new software program, it
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