Lecture 25 April 6 exam 3

Lecture 25 April 6 exam 3 - Announcements HW for ch. 15 due...

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Announcements HW for ch. 15 due tonight (everyone has to do this one and next Monday’s too)! Key for MT2 is on BB Lectures: Ch11 today, 12 on Weds, and 13 on Thurs.
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Resource Markets – Ch. 11
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3 of 26 INPUT DEMAND: THE RESOURCE MARKETS Firm and Household Decisions
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Resource market for carpenters 4 Hours of labor per period E 0 Dollars per hour of labor W D S The intersection of the upward-sloping supply curve of carpenters with the downward-sloping demand curve determines the equilibrium wage, W, and the level of employment, E. Resource (input) Markets (ch 11)
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The Market Demand for Resources Resource demand comes from firms Derived demand – demand for inputs is “derived” from the demand for the outputs that require those inputs. Market demand Sum of demands for a resource In all its uses Downward sloping The demand for a resource is downward sloping: As price falls, producers Are more willing to buy Relatively cheaper Substitution in production And have greater ability to buy 5
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Opportunity Cost and Economic Rent Economic Rent: The portion of a resource’s total earning that exceeds its opportunity cost, or earnings greater than the amount required to keep the resource in its present use. Very similar to “producer surplus” No alternative uses Perfectly inelastic supply No opportunity cost All earnings are economic rent Earns the same in current and best alternative use Perfectly elastic supply All earnings are opportunity cost No economic rent Most markets are between these extremes – some economic rent is earned in excess of opportunity costs. 6
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Opportunity cost and economic rent 7 (a) All earnings are economic rent (b) All earnings are opportunity costs (c) Earnings divided between economic rent and opportunity cost S Millions of acres per month 10 0 Hours of labor per day 1,000 0 Hours of labor per day 5,000 0 10,000 D Dollars per unit $1 D S $10 D S $14 7 Economic rent Opportunity costs Opportunity costs Economic rent
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8 of 26 INPUT MARKETS: BASIC CONCEPTS (Focus on Labor) DEMAND FOR INPUTS: A DERIVED DEMAND derived demand The demand for resources (inputs) that is dependent on the demand for the outputs those resources can be used to produce. Inputs are demanded by a firm if and only if
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This note was uploaded on 08/15/2011 for the course ECON 2005 taught by Professor Zirkle during the Spring '07 term at Virginia Tech.

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Lecture 25 April 6 exam 3 - Announcements HW for ch. 15 due...

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