101chapter10

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

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Unformatted text preview: Chapter 10: Pricing in Resource Chapter 10: Pricing in Resource Markets Markets • Resource markets • Resource demand • The labor market Factor/Resource markets Factor/Resource markets • Factors of production: land labor capital entrepreneurship • factor prices determined in resource markets resources markets resources markets • same concepts of demand and supply now applied to factors of production resource demand resource demand • producer will demand an additional unit of resource if MR of resource > MC of resource example: Wal Mart 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 example: lawn service 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 terms 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 rule for resource demand rule for resource demand • firm hires additional resources until MRC = MRP cost of the extra resource = extra revenue from the resource resource supply 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….. The Market for Resources The Market for Resources • resource demand downward sloping producers less willing, able to buy resources at higher prices • resource demand is a DERIVED demand it depends on the demand for the final product examples 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 Shifts in demand for a resource Shifts in demand for a resource...
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This note was uploaded on 04/02/2012 for the course ECO 101 taught by Professor Laniga during the Spring '08 term at SUNY Oswego.

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

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