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Factor Markets: The market for stuff that makes stuff. (Land, Labor and Capital)
2011Final Project- power point2012 Final ProjectEssential Questions-
In what sense is demand for labor “derived” demand?
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What is the relationship between a firm’s marginal revenue product curve and it’s demand for labor?
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What are the key factors that influence elasticity of demand for inputs?
Key Concepts
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Derived Demand
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Economic Rent
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Marginal Physical Product of Labor (MPP)
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Marginal Revenue Product (MRP)= price of firms output* MPP
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Marginal Revenue Cost (MRC)= Change in total cost/change in amount of resource used
Firm will keep hiring until additional cost of hiring last worker = additional revenue made by that worker
In a competitive labor market Derived Demand Curve for labor is downward sloping
Price Elasticity of Demand for Inputs will be greater based on
- The greater the price elasticity of demand
- The # of substitutes for input
- The larger proportion of total cost of that input
- The longer period of time being considered
Long- Run Demand for labor is negatively sloped
- Substitution Effect- Increased wages leads to an increase in demand for innovation
- Output Effect- Increased wages lead to decreased output
Wage Determination
- Laborers supply labor
- Firms Demand Labor
- Efficiency Wages- set above equilibrium
- Hiring “ Insiders”
Reasons for Shifts in Demand
- Change in demand for final product – auto industry
- Change in Labor Productivity
- Change in price of substitutes and compliments
Determinants for supply of labor
- Wages in other industries
- Changes in working conditions
- Job flexibility
A Monopolists input demand curve
- MRP<P
- Monopolies hire less workers
Derived demand for land, labor and capital leads to cost minimization
- Outsourcing American Jobs
- Investment in Technology
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Is this sort of creative destruction good for America?
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Monopsonies
Helpful Websites- https://www.youtube.com/watch?v=Cb5rAZZSJfg - Economics Help Video
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http://www.careeronestop.org/ExploreCareers/Occupations/OccupationsWhatsHot.aspx- Jobs in High Demand
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http://www.careeronestop.org/ExploreCareers/Occupations/OccupationsWhatsHot.aspx- CNBC's 2011 best jobs list
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http://www.econedlink.org/lessons/index.php?lid=951&type=educator- The lost derived demand in Cleveland when NBA star Lebron James decided to play for the Miami Heat.
Former AP FRQ Questions-
2011 (Form B) #3
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2010 #2
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2010 (Form B) #2
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2007 #2
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Last Modified on January 8, 2021