Principles of Economics- Mankiw (5th) 386

Principles of - 398 PA R T S I X THE ECONOMICS OF LABOR MARKETS factors of production the inputs used to produce goods and services landowners

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398 PART SIX THE ECONOMICS OF LABOR MARKETS landowners higher rental income than others, and some capital owners greater profit than others? Why, in particular, do computer programmers earn more than gas station attendants? The answers to these questions, like most in economics, hinge on supply and demand. The supply and demand for labor, land, and capital determine the prices paid to workers, landowners, and capital owners. To understand why some peo- ple have higher incomes than others, therefore, we need to look more deeply at the markets for the services they provide. That is our job in this and the next two chapters. This chapter provides the basic theory for the analysis of factor markets. As you may recall from Chapter 2, the factors of production are the inputs used to produce goods and services. Labor, land, and capital are the three most important factors of production. When a computer firm produces a new software program, it uses programmers’ time (labor), the physical space on which its offices sit (land),
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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