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Principles of Economics- Mankiw (5th) 402

Principles of Economics- Mankiw (5th) 402 - 414 PA R T S I...

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414 PART SIX THE ECONOMICS OF LABOR MARKETS The demand, in turn, depends on that particular factor’s marginal productivity. In equilibrium, each factor of production earns the value of its marginal contribution to the production of goods and services. The neoclassical theory of distribution is widely accepted. Most economists begin with the neoclassical theory when trying to explain how the U.S. economy’s $8 trillion of income is distributed among the economy’s various members. In the following two chapters, we consider the distribution of income in more detail. As you will see, the neoclassical theory provides the framework for this discussion. Even at this point you can use the theory to answer the question that began this chapter: Why are computer programmers paid more than gas station atten- dants? It is because programmers can produce a good of greater market value than can a gas station attendant. People are willing to pay dearly for a good computer
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