101chapter10

101chapter10 - Chapter 10 Pricing in Resource Markets...

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13:00 Chapter 10: Pricing in Resource Markets Resource markets Resource demand The labor market
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13:00 13:00 2 Factor/Resource markets Factors of production: land labor capital entrepreneurship factor prices determined in resource markets
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13:00 13:00 3 resources markets same concepts of demand and supply now applied to factors of production
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13:00 13:00 4 resource demand producer will demand an additional unit of resource if MR of resource > MC of resource
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13:00 13:00 5 example: Wal Mart labor market 1 more clerk costs $400 per week 1 more clerk increases revenue by $500 week hire 1 more clerk? Yes! $500 > $400
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13:00 13:00 6 example: lawn service capital market larger, faster mower costs extra $400/wk. but mow more lawns, extra $600/wk. in revenue buy the mower? Yes! $600 > $400
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13:00 13:00 7 terms marginal revenue product (MRP) extra revenue from one more unit of resource marginal resource cost (MRC) extra cost for one more unit of resource
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13:00 13:00 8 rule for resource demand firm hires additional resources until MRC = MRP cost of the extra resource = extra revenue from the resource
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13:00 13:00 9 resource supply you will supply your resources to the “best” option highest paying (if all else equal) nonmonetary factors are important firms must compensate when jobs are dirty, dangerous, illegal…. .
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13:00 13:00 10 The Market for Resources resource demand downward sloping producers less willing, able to buy resources at higher prices
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13:00 13:00 11 resource demand is a DERIVED demand it depends on the demand for the final product
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13:00 13:00 12 examples demand for nurses depends on demand for healthcare demand for steel depends on demand for cars demand for plywood depends on demand for houses
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13:00 13:00 13 Shifts in demand for a resource demand for final product if product demand rises, MRP rises resource demand shifts right productivity of resource better resource, higher MP & MRP resource demand shifts right
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This note was uploaded on 07/19/2011 for the course ECON 101 taught by Professor Wood during the Spring '07 term at Berkeley.

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101chapter10 - Chapter 10 Pricing in Resource Markets...

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