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Factor Markets

Factor Markets. Zakariya Ahmed, Stephen Han, Duy Tran. A factor market is also known as a resource market. Factor market is where factors of production are bought and sold. introduction.

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Factor Markets

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  1. Factor Markets Zakariya Ahmed, Stephen Han, Duy Tran

  2. A factor market is also known as a resource market. • Factor market is where factors of production are bought and sold. introduction

  3. A factor market is different from a product market in the sense that a factor market involves something that is used in the production of a consumer product whereas the product market is the market for a final good or services. Factor vs product market

  4. Factors of production are inputs used in the production of goods and services. • Factors of production include land, labor, capital and entrepreneurship. Factors of production

  5. The demand that changes as a result of changes in price of other related goods or services. • Demand is derived from parent goods in a factor market. Derived Demand

  6. Demand curve is downward sloping because marginal product always decrease. • Marginal Physical Product: The changes in the output quantity that results from the allocation of an additional unit of a specific input. Derived Demand….

  7. The change in revenue that results from addition of one extra unit when all other factors are kept equal • ΔTOTAL REVENUE • ΔRESOURCE QUANTITY • MRP=--------------------------------------- Marginal Revenue product

  8. The amount each addition unit of resource adds to the firm’s total cost (resources). • ΔTOTAL COST • ΔRESOURCE QUANTITY • MRC=--------------------------------------- Marginal Resource cost

  9. A firm will continue to buy factors of production when it’s MRP exceeds it’s MRC. • Profit Maximizing point is when MRP = MRC Factors of Production

  10. Labour, alongside with capital, is the most common type of input demanded. • Demand in a labour market is a derived demand that is derived from the demand for the product or output of a firm. Labour markets

  11. If a firm is in a perfectly competitive labour market, they are price/wage taker. • Every time a firm obtains another unit of labour, their costs increase by the price of the labour. (PL) Perfectly competitive Labour market

  12. A firm in a perfectly competitive labourmarket would have a MRC that is equal to PL. • Supply is equal to MRC (Fig. 1) because additional cost (for workers) stay constant. Perfectly competitive Labour market…. Fig. 1

  13. A firm in a perfectly competitive labourmarket would have a MRC that is equal to PL. • Supply is equal to MRC (Fig. 1) because additional cost (for workers) stay constant. Perfectly competitive Labour market…. Fig. 2

  14. 1. the marginal cost of producing a unit of output. • a. The price of the firm's output is equal to • b. The value-of-marginal-product curve is • c. Purchase price of land or capital is • d. Value of the marginal product Multiple choice

  15. 2. the extra revenue the firm gets from hiring an additional unit of a factor of production. • a. Diminishing marginal product is • b. Marginal product of labor is • c. Rental price is • d. Marginal revenue product is Multiple choice

  16. 3. Market Resource Cost is equal to price of labourbecause • Supply is equal to MRC • A firm is in a perfectly competitive market • A firm is not in a perfectly competitive market • The raptors lost in the first round of playoffs. Multiple choice

  17. 4. What does a factor market involves • It involves finished goods. • It involves things used in production • It includes labour, land, and capital • Both b and c Multiple choice

  18. What is the formula for MRP? What is the formula for MRC? What is a derived demand? Review:

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