Unit 5 - Factor Markets Guide (copy)

Factor markets

Factor markets

is a resource for companies to buy what the need to produce their goods and services.

Monopsonies

pay a lower wage and hire less than perfect competition.

Equilibrium wage

in the market: establishes the wage that firms will pay workers.

Least cost rule

marginal product of labor /price of labor= marginal product of capital /price of capital (MPL /PL= MPK /PK)

Factor markets

is a resource for companies to buy what the need to produce their goods and services

Derived demand

the demand from a resource is derived by product demand

Marginal revenue product (MRP)

the additional revenue that is generated by an additional resource/worker

Marginal factor cost (MFC)

the additional cost of an additional resource/worker

Least cost rule

marginal product of labor/price of labor = marginal product of capital/price of capital (MPL/PL=MPK/PK)

Market curve

standard supply and demand curve

Equilibrium wage in the market

establishes the wage that firms will pay workers

Determinants of Labor Demands (DL)

1. Productivity of the Resource

2. Price of Other resources

3. Product demand

Determinants of Labor Supply (SL)

1. Personal values

2. Intervention by Government

3. Number of Qualified workers

Why are the determinants of Supply and Demand Important

These factors determine the supply and demand of these quantities

Monopsonistic Markets

Many sellers, one buyer

Example of Imperfect Competition

Monopsonies which pay a lower wage and hire less than perfect competition