Chapter 24 and 24 Price of Inputs [TA]

Chapter 24 and 24 Price of Inputs [TA] - Price of Inputs...

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Price of Inputs and Perfect Labor Markets Chapters 24 & 25
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Derived Demands for Resources Consumers’ demands for goods yield derived demands for the resources that produce those goods. Derived demand is created by direct demand for consumption goods Example: Demand for buns, beef, condiments, and labor increases when demand for hamburgers increase
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Demand for Labor The Marginal Physical Product of Labor (MPPL) is the extra amount of output produced by adding a unit of labor # of Workers Output per week MPPL 1 3.0 3.0 2 5.0 2.0 3 6.8 1.8 4 8.4 1.6 5 9.8 1.4 6 11.0 1.2 7 12.0 1.0
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Marginal Revenue Product The Marginal Revenue Product (MRP) is the extra sales revenue from the output generated by an extra resource unit MRP= MR X MPPL A resource’s MRP reflects its value to a firm and can therefore be seen as that firm’s demand for that particular resource
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Marginal Revenue Product # of Workers Output per week MPPL MRP (in $) 1 3.0 3.0 $1,500 2 5.0 2.0 1,000 3 6.8 1.8 900 4 8.4 1.6 800 5 9.8 1.4 700 6 11.0 1.2 600 7 12.0 1.0 500
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