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Activity 45 & 46 derived demand for a resource

Activity 45 & 46 derived demand for a resource. The demand for a resource is called Derived Demand because it is derived from the demand for the goods and services that are produced by the resource. Quick review. MPP - Marginal Physical Product (Marginal Product)

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Activity 45 & 46 derived demand for a resource

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  1. Activity 45 & 46derived demand for a resource The demand for a resource is called Derived Demand because it is derived from the demand for the goods and services that are produced by the resource

  2. Quick review • MPP - Marginal Physical Product (Marginal Product) • The additional output from an additional unit of input • MR – Marginal Revenue • The additional revenue from an additional unit of output • MRP – Marginal Revenue Product • The additional revenue from an additional unit of input

  3. Complete the table and then plot MRP on the adjacent graphNote: in the competitive model, a competitive firm pays a wage set by supply and demand in an industries’ competitive labor market;the wage will be perfectly elastic $60 $55 $50 $45 $40 $35 Resource Price $30 Competitive wage $25 $20 $15 $10 $5 0 4 5 6 1 2 3 Units of resource demanded

  4. The MRP (Marginal Revenue Product) is the firm’s demand curve for the resource $60 $55 $50 $45 $40 $35 Resource Price $30 Competitive wage $25 $20 $15 MRP = Demand for labor $10 $5 0 4 5 6 1 2 3 Units of resource demanded

  5. Indicate in the short-run whether there would be an Increase, Decrease or No Change resulting from the following headlines

  6. Indicate in the short-run whether there would be an Increase, Decrease or No Change resulting from the following headlines

  7. Note that when the model is not perfectly competitive; MRP is no longer equal to MPP x Price!As quantity is increasing, product price is decreasing (because of the law of diminishing marginal utility)so you can only look at the change in TR (Total Revenue / one)

  8. Note that when the model is not perfectly competitive; MRP is no longer equal to MPP x Price!As quantity is increasing, product price is decreasing (because of the law of diminishing marginal utility)so you can only look at the change in TR (Total Revenue / one)

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