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Resource Markets & Economic Rent: An In-Depth Analysis

Explore the Resource Markets in Economics with detailed insights on economic rent, opportunity costs, and market equilibriums. Understand the impact of resource demand and supply on income distribution. Learn about labor allocation, production costs, and the functional distribution of income across different sectors. Dive into the dynamics of carpentry markets, alternative uses for labor, and equilibrium pricing. Uncover key concepts through real-world examples and practical scenarios.

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Resource Markets & Economic Rent: An In-Depth Analysis

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  1. Fifth EditionEconomics A Contemporary Introduction William A. McEachern Resource Markets

  2. S r o b a l f o r u o h r e W p s r a l l o D D 0 E Hours of labor per period Exhibit 1: Resource Market for Carpenters Resource Markets

  3. S' f S' h r r u u o o h h $24 24 r r e e p p s s r r a a l l l l o o D D 60 10 Exhibit 2: Market for Carpenters in Alternative Uses: Home Building and Furniture Making (a) Home building (b) Furniture making S S h f $25 20 D h D f 58 0 0 12 Hours of labor per week (thousands) Hours of labor per week (thousands) Resource Markets

  4. S t i n u r e p s r $1 a l l o D Economic rent D 0 10 Millions of acres per month Exhibit 3a: Opportunity Cost and Economic Rent (All Resource Returns are Economic Rent) Resource Markets

  5. Exhibit 3b: Opportunity Cost and Economic Rent (All Resource Returns are Opportunity Costs) t i n u r e p s S r $10 a l l o D Opportunity costs D 0 1,000 Hours of labor per week Resource Markets

  6. S t i $10 n u r e Economic p rent s r a l l o D 5 D Opportunity costs 0 5,000 10,000 Hours of labor per week Exhibit 3c: Opportunity Cost and Economic Rent (Resource Returns are Divided Between Economic Rent and Opportunity Cost) Resource Markets

  7. y y Resource demand a a $200 d d $200 Resource supply Marginal revenue product = resource demand r r e e p p r r e e k k Marginal resource cost = resource supply r r o o w w 100 r r 100 e e p p s s r r a a l l l l o o D D 0 E 0 Workers per day Workers per day 6 10 Exhibit 6: Market Equilibrium For a Resource and the Firm’s Employment Decision Market Firm Resource Markets

  8. Exhibit 7: Functional Distribution of Income: Percentage Share of Each Source of National Income by Decade Source: Irving Kravis, “Income Distribution: Functional Shares.” International Encyclopedia of Social Sciences 7 (Free Press, 1968), and Economic Report of the President, February 1999. Resource Markets

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